-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KLwlLPsdf2/3VXPMg3rIlzcZjwp2T1jfwPIh7ikJt8CAIQ6tWFvKX0R/eiwm6GEr 8Plvn7h5pRamUjM7UCM4bQ== 0000950123-05-009477.txt : 20050805 0000950123-05-009477.hdr.sgml : 20050805 20050805122826 ACCESSION NUMBER: 0000950123-05-009477 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050801 ITEM INFORMATION: Bankruptcy or Receivership ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050805 DATE AS OF CHANGE: 20050805 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LORAL SPACE & COMMUNICATIONS LTD CENTRAL INDEX KEY: 0001006269 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 133867424 STATE OF INCORPORATION: D0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14180 FILM NUMBER: 051001697 BUSINESS ADDRESS: STREET 1: 600 THIRD AVE STREET 2: C/O LORAL SPACECOM CORP CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126971105 MAIL ADDRESS: STREET 1: 600 THIRD AVE STREET 2: C/O LORAL SPACECOM CORP CITY: NEW YORK STATE: NY ZIP: 10016 8-K 1 y11548e8vk.txt FORM 8-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): August 1, 2005 Loral Space & Communications Ltd. ------------------------------------------ (Exact name of registrant as specified in its charter) Bermuda 1-14180 13-3867424 - ---------------------------- ------------- -------------- (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) c/o Loral SpaceCom Corporation 10016 600 Third Avenue, New York, New York - ------------------------------- ----------- (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: (212) 697-1105 Not Applicable ---------------------------------------------- Former name or former address, if changed since last report Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ ITEM 1.03. BANKRUPTCY OR RECEIVERSHIP On July 15, 2003, Loral Space & Communications Ltd. ("Loral" or the "Company") and certain of its subsidiaries (the "Debtor Subsidiaries" and collectively with Loral, the "Debtors"), filed voluntary petitions for reorganization under chapter 11 of title 11 ("Chapter 11") of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") (Lead Case No. 03-4171-(RDD), Case Nos. 03-41709 (RDD) through 03-41728 (RDD)) (the "Chapter 11 Cases"). Loral and the Debtor Subsidiaries continue to manage their properties and operate their businesses as "debtors in possession" under the jurisdiction of the Bankruptcy Court and in accordance with the provisions of the Bankruptcy Code. On August 1, 2005 (the "Confirmation Date"), the Court entered an order (the "Confirmation Order") confirming the Debtors' Fourth Amended Joint Plan of Reorganization, as modified by the Confirmation Order (the "Plan"). Following the satisfaction of various conditions, the Company will emerge from Chapter 11 on the effective date (the "Effective Date") of the Plan. The Plan and the Confirmation Order are incorporated by referenced herein. Summary of the Plan The following is a summary of the matters contemplated to occur either pursuant to or in connection with the confirmation and implementation of the Plan. This summary only highlights certain of the substantive provisions of the Plan and is not intended to be a complete description of, or a substitute for a full and complete reading of, the Plan. This summary is qualified in its entirety by reference to the full text of the Plan. Capitalized terms used but not defined in this Form 8-K have the meanings set forth in the Plan. 1. Structure of New Loral On the Effective Date, Loral Space & Communications Inc., a newly-formed Delaware corporation ("New Loral") will own, through an intermediate holding company, all of the outstanding common stock of two subsidiaries: Loral Skynet Corporation, a Delaware corporation formerly known as Loral Orion, Inc. (respectively, "New Skynet" and "Orion") and Space Systems/Loral, Inc., a Delaware corporation ("SS/L"). New Skynet will succeed to the ownership of all of the assets of Orion and, directly or indirectly, the following additional assets held by the Debtors: (i) all of the equity interests in XTAR, L.L.C.; (ii) all licenses or rights to orbital slots; (iii) all of the Telstar 18 satellite transponders and equity (if any) that is not currently owned by Orion; (iv) EdS; (v) Loral Skynet do Brasil Ltda. (including all of its assets and the orbital slot license for EdS); (vi) all owned transponders on the Satmex 5 satellite owned by Satelites Mexicanos, S.A. de C.V. ("Satmex"); (vii) the joint venture rights and interests in Mabuhay Space Holdings Limited; (viii) all interests in Globalstar, L.L.C.; (ix) trademark rights relating to the satellite services business; (x) all equity in Satmex; (xi) other assets used to operate the satellites; and (xii) all of the equity interests in Loral Skynet Network Services, Inc. ("LSNS"). New Skynet will be the satellite services arm of New Loral and will continue to provide satellite services and, through LSNS, network and professional services and support. SS/L will continue its existence as the satellite design and manufacturing arm of New Loral and will own substantially all of its former assets, other than those assets transferred as described above. 2. Classification and Treatment of Claims and Equity Interests The Plan classifies Claims and Equity Interests separately and provides different treatment for different Classes of Claims and Equity Interests in accordance with the Bankruptcy Code. The following table briefly summarizes the classification and treatment of Claims and Equity Interests under the Plan: 2
Type of Claim Class or Equity Interest Treatment - ----- ------------------ --------- - -- Administrative Unimpaired; paid in full, in Cash, or Expense Claims in accordance with the terms and against the conditions of transactions or Ltd. Debtors(1) agreements relating to obligations incurred in the ordinary course of business during the pendency of the Reorganization Cases or assumed by the Ltd. Debtors as Debtors in Possession. - -- Priority Tax Unimpaired; except to the extent that a Claims against the holder agrees to different treatment, Ltd. Debtors at the option of the Ltd. Debtors, after consultation with the Creditors' Committee, either (i) paid in full, in Cash, or (ii) paid over a six-year period from the date of assessment as provided in section 1129(a)(9)(C) of the Bankruptcy Code with interest payable at a rate of 6% per year, subject to the Ltd. Debtors' option to prepay such Claim. - -- Indenture Trustee Unimpaired; paid in full, in Cash, as Fees Administrative Expense Claims. Ltd. Other Priority Unimpaired; paid in full, in Cash. Class 1 Claims against the Ltd. Debtors Ltd. Secured Tax the Impaired; except to the extent that a Class 2 Claims against holder agrees to different treatment, Ltd. Debtors at the option of the Ltd. Debtors, after consultation with the Creditors' Committee, (i) Cash in the amount equal to such Allowed Secured Tax Claim, including applicable interest as provided in section 506(b) of the Bankruptcy Code, on or as soon as reasonably practicable after the Effective Date, (ii) equal annual Cash payments beginning one year after the Effective Date in an aggregate amount equal to such Allowed Secured Tax Claim, with interest payable at a rate of 6% per annum over a six-year period, subject to the Ltd. Debtors' option to prepay such Claim, or (iii) upon such other terms determined by the Bankruptcy Court to provide the holder of such Allowed Secured Tax Claim deferred Cash payments having a value, as of the Effective Date, equal to such Claim. If the Ltd. Debtors treat a Claim under clause (i) above, the Liens securing such Claim shall be deemed released. Ltd. Secured Claims Unimpaired; at the sole option of the Ltd. Class 3 against the Ltd. Debtors, (i) Cash in the amount equal to 100% of the unpaid
- ---------- (1) The "Ltd. Debtors" consist of all of the Debtors other than the Orion Debtors, the SpaceCom Debtors and the SS/L Debtors. 3
Type of Claim Class or Equity Interest Treatment - ----- ------------------ --------- Debtors amount of such Allowed Secured Claim, (ii) the proceeds of the sale or disposition of the Collateral securing such Allowed Claim to the extent of the value of the holder's secured interest in such Collateral, (iii) the Collateral securing such Allowed Claim, or (iv) such other distribution as necessary to satisfy the requirements of section 1124 of the Bankruptcy Code. If the Ltd. Debtors treat a Claim under clause (i) or (ii) above, the Liens securing such Claim shall be deemed released. Ltd. Ltd. General Impaired; will receive its Ltd. Class 4 Class 4 Unsecured Claims Pro Rata Share(2) of the New Loral Common Stock Balance.(3) Ltd. Ltd. Preferred Impaired; no distribution. Class 5 Stock Interests Ltd. Ltd. Equity Impaired; no distribution. Class 6 Interests Ltd. Securities Impaired; no distribution in accordance Class 7 Litigation with section 510(b) of the Bankruptcy Claims Code. - -- Administrative Unimpaired; paid in full, in Cash, or in Expense Claims accordance with the terms and conditions against the of transactions or agreements relating to Orion Debtors(4) obligations incurred in the ordinary course of business during the pendency of the Reorganization Cases or assumed by the Orion Debtors as Debtors in Possession. - -- Priority Tax Unimpaired; except to the extent that a holder Claims against agrees to different treatment, at the option the Orion of the Orion Debtors, after consultation Debtors with the Creditors' Committee, either (i) paid in full, in Cash, or (ii) paid over a six-year period from the date of assessment as provided in section 1129(a)(9)(C) of the Bankruptcy Code with interest payable at a rate of 6% per year, subject to the Orion Debtors' option to prepay such Claim.
- ---------- (2) A "Ltd. Class 4 Pro Rata Share" is the ratio (expressed as a percentage) of the amount of an Allowed Ltd. General Unsecured Claim to the sum of (a) the aggregate amount of Allowed Ltd. General Unsecured Claims and (b) the aggregate of the Disputed Claim Amounts of All Disputed Claims in Ltd. Class 4. The "Disputed Claim Amount" is the estimated dollar value of a Disputed Claim pursuant to section 502(c) of the Bankruptcy Code or as otherwise agreed to between the holder of such Claim and the applicable Debtor or Reorganized Debtor, or as otherwise determined by the Bankruptcy Court, or if no such amount exists, the amount set forth as the liquidated amount of such Disputed Claim in the proof of claim filed in respect of such Claim. (3) The "New Loral Common Stock Balance" is 12,420,652 shares of New Loral Common Stock. (4) The "Orion Debtors" consist of Orion and its Debtor subsidiaries. 4
Type of Claim Class or Equity Interest Treatment - ----- ------------------ --------- Orion Other Priority Unimpaired; paid in full, in Cash. Class 1 Claims against the Orion Debtors Orion Secured Tax Impaired; except to the extent that a Class 2 Claims against the holder agrees to different treatment, Orion Debtors at the option of the Orion Debtors, after consultation with the Creditors' Committee, (i) Cash in the amount equal to such Allowed Secured Tax Claim, including applicable interest as provided in section 506(b) of the Bankruptcy Code, on or as soon as reasonably practicable after the Effective Date, (ii) equal annual Cash payments beginning one year after the Effective Date in an aggregate amount equal to such Allowed Secured Tax Claim, with interest payable at a rate of 6% per annum over a six-year period, subject to the Orion Debtors' option to prepay such Claim, or (iii) upon such other terms determined by the Bankruptcy Court to provide the holder of such Allowed Secured Tax Claim deferred Cash payments having a value, as of the Effective Date, equal to such Claim. If the Orion Debtors treat a Claim under clause (i) above, the Liens securing such Claim shall be deemed released. Orion Secured Claims Unimpaired; at the sole option of the Class 3 against the Orion Debtors, (i) Cash in the amount Orion Debtors equal to 100% of the unpaid amount of such Allowed Secured Claim, (ii) the proceeds of the sale or disposition of the Collateral securing such Allowed Claim to the extent of the value of the holder's secured interest in such Collateral, (iii) the Collateral securing such Allowed Claim, or (iv) such other distribution as necessary to satisfy the requirements of section 1124 of the Bankruptcy Code. If the Orion Debtors treat a Claim under clause (i) or (ii) above, the Liens securing such Claim shall be deemed released. Orion Orion General Impaired; (A) distribution of an Orion Class 4 Unsecured Pro Rata Share(6) of (i) 7,579,348 shares Claims(5) of New Loral Common Stock as of the Effective Date and (ii) the New Skynet Preferred Stock and (B) each holder of an Allowed Orion General Unsecured Claim may participate in a rights offering to subscribe for the New Skynet Notes on account of such Claim.
- ---------- (5) In addition to holding a Claim in Orion Class 4, holders of Orion 10% Note Claims also hold Claims in Ltd. Class 4 on account of their Ltd. Guaranty Claims. (6) An "Orion Pro Rata Share" is the ratio (expressed as a percentage) of the amount of an Allowed Orion General Unsecured Claim to the sum of (a) the aggregate amount of all Allowed Orion General Unsecured 5
Type of Claim Class or Equity Interest Treatment - ----- ------------------ --------- Orion Orion Equity Unimpaired; unaltered. Class 5 Interests - -- Administrative Unimpaired; paid in full, in Cash, or Expense Claims in accordance with the terms and against the conditions of transactions or SpaceCom agreements relating to obligations Debtors(7) incurred in the ordinary course of business during the pendency of the Reorganization Cases or assumed by the SpaceCom Debtors as Debtors in Possession. - -- Priority Tax Unimpaired; except to the extent that a Claims against the holder agrees to different treatment, SpaceCom Debtors at the option of the SpaceCom Debtors, after consultation with the Creditors' Committee, either (i) paid in full, in Cash, or (ii) paid over a six-year period from the date of assessment as provided in section 1129(a)(9)(C) of the Bankruptcy Code with interest payable at a rate of 6% per year, subject to the SpaceCom Debtors' option to prepay such Claim. SpaceCom Other Priority Unimpaired; paid in full, in Cash. Class 1 Claims against the SpaceCom Debtors
- ---------- Claims and (b) the Disputed Claim Amounts of all Disputed Claims in Orion Class 4. The "Disputed Claim Amount" is the estimated dollar value of a Disputed Claim pursuant to section 502(c) of the Bankruptcy Code or as otherwise agreed to between the holder of such Claim and the applicable Debtor or Reorganized Debtor, or as otherwise determined by the Bankruptcy Court, or if no such amount exists, the amount set forth as the liquidated amount of such Disputed Claim in the proof of claim filed in respect of such Claim. (7) The "SpaceCom Debtors" consist of SpaceCom and its Debtor subsidiaries, other than SS/L and its Debtor subsidiary. 6
Type of Claim Class or Equity Interest Treatment - ----- ------------------ --------- SpaceCom Secured Tax Impaired; except to the extent that a Class 2 Claims against holder agrees to different treatment, the SpaceCom at the option of the SpaceCom Debtors, Debtors after consultation with the Creditors' Committee, (i) Cash in the amount equal to such Allowed Secured Tax Claim, including applicable interest as provided in section 506(b) of the Bankruptcy Code, on or as soon as reasonably practicable after the Effective Date, (ii) equal annual Cash payments beginning one year after the Effective Date in an aggregate amount equal to such Allowed Secured Tax Claim, with interest payable at a rate of 6% per annum over a six-year period, subject to the SpaceCom Debtors' option to prepay such Claim, or (iii) upon such other terms determined by the Bankruptcy Court to provide the holder of such Allowed Secured Tax Claim deferred Cash payments having a value, as of the Effective Date, equal to such Claim. If the SpaceCom Debtors treat a Claim under clause (i) above, the Liens securing such Claim shall be deemed released. SpaceCom Secured Claims Unimpaired; at the sole option of the Class 3 against the SpaceCom Debtors, (i) Cash in the SpaceCom amount equal to 100% of the unpaid Debtors amount of such Allowed Secured Claim, (ii) the proceeds of the sale or disposition of the Collateral securing such Allowed Claim to the extent of the value of the holder's secured interest in such Collateral, (iii) the Collateral securing such Allowed Claim, or (iv) such other distribution as necessary to satisfy the requirements of section 1124 of the Bankruptcy Code. If the SpaceCom Debtors treat a Claim under clause (i) or (ii) above, the Liens securing such Claim shall be deemed released. SpaceCom SpaceCom Unimpaired; paid in full, in Cash in an Class 4 General amount equal to such Allowed Claim plus Unsecured interest thereon (without any Claims compounding) at a rate of 6% per annum for the period from the Commencement Date through the Effective Date, on or as soon as reasonably practicable after the later of (i) the Effective Date, (ii) the date such Claim becomes Allowed and (iii) the date for payment provided by any agreement or understanding between the applicable SpaceCom Debtor or SpaceCom Debtors and the holder of such Claim. SpaceCom SpaceCom Unimpaired; unaltered. Class 5 Equity Interests
7
Type of Claim Class or Equity Interest Treatment - ----- ------------------ --------- - -- Administrative Unimpaired; paid in full, in Cash, or Expense Claims in accordance with the terms and against the conditions of transactions or SS/L Debtors(8) agreements relating to obligations incurred in the ordinary course of business during the pendency of the Reorganization Cases or assumed by the SS/L Debtors as Debtors in Possession. - -- Priority Tax Unimpaired; except to the extent that a Claims against holder agrees to different treatment, the SS/L at the option of the SS/L Debtors, Debtors after consultation with the Creditors' Committee, either (i) paid in full, in Cash, or (ii) paid over a six-year period from the date of assessment as provided in section 1129(a)(9)(C) of the Bankruptcy Code with interest payable at a rate of 6% per year, subject to the SS/L Debtors' option to prepay such Claim. SS/L Other Priority Unimpaired; paid in full, in Cash. Class 1 Claims against the SS/L Debtors SS/L Secured Tax Impaired; except to the extent that a Class 2 Claims against holder agrees to different treatment, the SS/L at the option of the SS/L Debtors, Debtors after consultation with the Creditors' Committee, (i) Cash in the amount equal to such Allowed Secured Tax Claim, including applicable interest as provided in section 506(b) of the Bankruptcy Code, on or as soon as reasonably practicable after the Effective Date, (ii) equal annual Cash payments beginning one year after the Effective Date in an aggregate amount equal to such Allowed Secured Tax Claim, with interest payable at a rate of 6% per annum over a six-year period, subject to the SS/L Debtors' option to prepay such Claim, or (iii) upon such other terms determined by the Bankruptcy Court to provide the holder of such Allowed Secured Tax Claim deferred Cash payments having a value, as of the Effective Date, equal to such Claim. If the SS/L Debtors treat a Claim under clause (i) above, the Liens securing such Claim shall be deemed released. SS/L Secured Claims Unimpaired; at the sole option of the Class 3 against the SS/L Debtors, (i) Cash in the amount SS/L Debtors equal to 100% of the unpaid amount of such Allowed Secured Claim, (ii) the proceeds of the sale or disposition of the Collateral securing such Allowed Claim to the extent of the value of the holder's secured interest in such Collateral, (iii) the Collateral securing such Allowed Claim, or (iv) such other distribution as necessary to
(8) The "SS/L Debtors" consist of SS/L and its Debtor subsidiary. 8
Type of Claim Class or Equity Interest Treatment - ----- ------------------ --------- satisfy the requirements of section 1124 of the Bankruptcy Code. If the SS/L Debtors treat a Claim under clause (i) or (ii) above, the Liens securing such Claim shall be deemed released. SS/L SS/L General Unimpaired; paid in full, in Cash in an Class 4 Unsecured amount equal to such Allowed Claim plus Claims interest thereon (without any compounding) at a rate of 6% per annum for the period from the Commencement Date through the Effective Date, on or as soon as reasonably practicable after the later of (i) the Effective Date, (ii) the date such Claim becomes Allowed and (iii) the date for payment provided by any agreement or understanding between the applicable SS/L Debtor or SS/L Debtors and the holder of such Claim. SS/L SS/L Equity Unimpaired; unaltered. Class 5 Interests
3. Securities to be Issued Under the Plan Pursuant to the Plan, New Loral and New Skynet, as applicable, are authorized without further act or action under applicable law, regulation, order, or rule to issue the following securities: (a) the New Loral Common Stock, (b) the New Skynet Preferred Stock, (c) the New Skynet Notes, (d) the Subscription Rights and (e) the Options. (a) New Loral Common Stock. As of the Effective Date, the authorized common stock of New Loral will consist of 40,000,000 shares of New Loral Common Stock, par value $.01 per share. Pursuant to the Plan, an aggregate of 20,000,000 shares of New Loral Common Stock will be issued to holders of Allowed Orion General Unsecured Claims and holders of Allowed Ltd. General Unsecured Claims. The rights of holders of New Loral Common Stock will be subject to the New Loral Certificate of Incorporation and New Loral By-laws and applicable Delaware law. The New Loral Common Stock issued to creditors pursuant to the Plan will be subject to dilution by shares of New Loral Common Stock issued under the New Management Stock Plan. New Loral will use its commercially reasonable efforts to cause the shares of New Loral Common Stock to be registered under Section 12 of the Securities Exchange Act of 1934, as amended, and listed on the Nasdaq market system or other national securities exchange for which it may qualify as soon as practicable after the Effective Date. (b) New Skynet Preferred Stock. The New Skynet Preferred Stock is non-convertible preferred stock of New Skynet, $0.01 par value per share, 2,000,000 shares of which shall be authorized for issuance, of which 1,000,000 shares shall be issued as of the Effective Date. Pursuant to the Plan, on the Effective Date, New Skynet shall issue to holders of Orion General Unsecured Claims New Skynet Preferred Stock with an aggregate liquidation preference of $200,000,000 plus accrued but unpaid dividends (the "Liquidation Preference"). The New Skynet Preferred Stock will have an annual dividend equal to 12% of the Liquidation Preference, which shall be mandatorily payable semi-annually in Cash, in arrears; provided, however, that such dividend may be payable in kind (i.e., in additional shares of New Skynet Preferred Stock) under certain circumstances as set forth in the Certificate of Designation of the New Skynet Preferred Stock. (c) New Skynet Notes. Pursuant to the Plan, in connection with the offering of Subscription Rights to the holders of Orion General Unsecured Claims described, New Skynet shall issue senior secured notes 9 in the principal amount of $120,000,000 plus the Backstop Fee, the terms of which are governed by the New Skynet Notes Indenture, dated as of the Effective Date, between New Skynet and an indenture trustee to be selected by New Skynet. The New Skynet Notes will be guaranteed by certain of New Skynet Subsidiaries on a senior secured basis. The New Skynet Notes will have a ten-year term, bearing interest at the rate of 14% per annum payable semi-annually in arrears; provided, however, that such interest may be payable in kind (i.e., in additional New Skynet Notes) under certain circumstances as set forth in the New Skynet Indenture. (d) Subscription Rights. Pursuant to the Plan, holders of Orion General Unsecured Claims were entitled to Subscription Rights, which are non-transferable, non-certificated rights to subscribe for the New Skynet Notes in the aggregate principal amount of $120,000,000. Upon expiration of the Rights Offering on July 29, 2005, $98,321,000 of the New Skynet Notes had been subscribed for. The amount of New Skynet Notes that are not subscribed for pursuant to the Rights Offering will be purchased by the Backstop Purchasers pursuant to the Backstop Commitment Agreement. In consideration for its agreement to backstop the Rights Offering, each Backstop Purchaser will, subject to the Backstop Commitment Agreement, receive its pro rata share of the Backstop Fee, consisting of $6 million of New Skynet Notes, as well as a reimbursement of certain expenses. The proceeds of the Rights Offering will be used to (i) purchase substantially all of the non-Orion satellite services assets and (ii) fund the cash portion of the distributions to be made to holders of Allowed Claims in SpaceCom Class 4 and SS/L Class 4. (e) Options. The New Management Stock Plan provides for a New Management Incentive Program (the "New Management Incentive Program") consisting of a stock option plan for the Reorganized Debtors' management and other key employees. The New Management Incentive Program will provide for Options to acquire shares of New Loral Common Stock representing up to 6.5% of the fully diluted common stock of New Loral as of the Effective Date, or approximately 1.39 million shares. 4. Discharge and Injunction The rights afforded in the Plan and the payments and distributions to be made thereunder will discharge all existing debts and claims, and except as provided in the Plan with regard to the Orion Equity interests, SpaceCom Equity interests and SS/L Equity interests held by the Debtors, will terminate all equity interests, of any kind, nature, or description whatsoever against or in the Debtors or any of their assets or properties to the fullest extent permitted by Section 1141 of the Bankruptcy Code. Except as provided in the Plan, upon the Effective Date, all existing claims against the Debtors and equity interests in the Debtors will be, and will be deemed to be, discharged and terminated, and all holders of claims and equity interests will be precluded and enjoined from asserting against the Reorganized Debtors, their successors or assignees, or any of their assets or properties, any other or further claim or equity interest based upon any act or omission, transaction, or other activity of any kind or nature that occurred prior to the Effective Date, whether or not such holder has filed a proof of claim or proof of equity interest, and whether or not the facts or legal bases therefore were known or existed prior to the Effective Date. Upon the Effective Date and in consideration of the distributions to be made under the Plan, except as otherwise expressly provided in the Plan, each holder (as well as any trustees and agents on behalf of each holder) of a claim or equity interest and any affiliate of such holder will be deemed to have forever waived, released and discharged the Debtors, to the fullest extent permitted by Section 1141 of the Bankruptcy Code, of and from any and all claims, equity interests, rights and liabilities that arose prior to the Effective Date. Upon the Effective Date, all such persons will be forever precluded and enjoined, pursuant to Section 524 of the Bankruptcy Code, from prosecuting or asserting any such discharged claim against or terminated equity interest in the Debtors. Except as otherwise expressly provided in the Plan, all persons or entities who have held, hold or may hold claims or equity interests and all other parties in interest, along with their respective present or former employees, agents, officers, directors, principals and affiliates, are permanently enjoined, from and after the Effective Date, from (I) commencing or continuing in any manner any action or other proceeding of any kind with respect to any such claim or equity interest against the Debtors or Reorganized Debtors, (II) the enforcement, attachment, collection or recovery by any manner or means of any judgment, award, decree or 10 order against the Debtors or Reorganized Debtors, (III) creating, perfecting, or enforcing any encumbrance of any kind against the Debtors or Reorganized Debtors or against the property or interests in property of the Debtors or Reorganized Debtors, or (IV) asserting any right of setoff, subrogation or recoupment of any kind against any obligation due from the Debtors or Reorganized Debtors or against the property or interests in property of the Debtors or Reorganized Debtors with respect to any such claim or equity interest. Such injunction will extend to any successors of the Debtors and Reorganized Debtors and their respective properties and interest in properties. Information Regarding Equity Interests The Company has 44,107,782 shares of common stock, 3,745,485 shares of Series C preferred stock and 734,135 shares of Series D preferred stock issued and outstanding as of the date of this report. As discussed above, on the Effective Date, the currently outstanding shares of the Company's common and preferred stock will be cancelled without any distribution to be made to the holders of such shares. See sections 3(a), (b) and (e) above for a discussion of the equity interests to be issued by New Loral pursuant to the Plan. Certain Financial Information Information regarding the assets and liabilities of the Company is set forth in the Company's monthly operating report for the period of April 22, 2005 through May 20, 2005 filed with the Bankruptcy Report in the form attached hereto as Exhibit 99.1. 11 ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit No. Description - ----------- ----------- 2.1 Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated June 3, 2005. (Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on June 8, 2005.) 2.2 Modification to Debtors' Fourth Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated August 1, 2005. 2.3 Bankruptcy Court Order, dated August 1, 2005, confirming the Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, as modified. 99.1 Company's Monthly Operating Report for the period of April 22, 2005 through May 20, 2005 filed with the Bankruptcy Report.
12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Loral Space & Communications Ltd. August 5, 2005 By: /s/ Janet Yeung -------------------------------- Name: Janet Yeung Title: Vice President, Deputy General Counsel and Assistant Secretary 13 Exhibit Index
Exhibit No. Description - ----------- ----------- 2.1 Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated June 3, 2005. (Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on June 8, 2005.) 2.2 Modification to Debtors' Fourth Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated August 1, 2005. 2.3 Bankruptcy Court Order, dated August 1, 2005, confirming the Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, as modified. 99.1 Company's Monthly Operating Report for the period of April 22, 2005 through May 20, 2005 filed with the Bankruptcy Report.
14 EX-2.2 2 y11548exv2w2.txt MODIFICATION TO DEBTORS 4TH AMENDED PLAN OF REORGANIZATION EXHIBIT 2.2 MODIFICATIONS TO THE PLAN OF REORGANIZATION The following modifications are hereby made to the Debtors' Fourth Amended Joint Plan of Reorganization (the "Plan of Reorganization"): a) The Plan of Reorganization is modified to include the following Section: 11.12. LIMITATIONS ON EXCULPATION AND RELEASES OF REPRESENTATIVES. Nothing in Sections 11.8 or 11.9 of the Plan of Reorganization shall (i) be construed to release or exculpate any entity from fraud, malpractice, criminal conduct, intentional unauthorized misuse of confidential information that causes damages, or ultra vires acts, or (ii) limit the liability of the professionals of the Debtors, the Reorganized Debtors, the Creditors' Committee or the Equity Committee to their respective clients pursuant to DR 6-102 of the Code of Professional Responsibility. b) Section 8.7 of the Plan of Reorganization shall include the following additional language: Notwithstanding the provisions of Section 8.7 of the Plan of Reorganization, New Loral shall indemnify, hold harmless and reimburse all persons who are or were directors, officers and/or employees of the Debtors on the Commencement Date or at any time thereafter against and for any and all obligations incurred directly or indirectly with respect to any taxes owed by the Debtors for the period prior to the Effective Date (including interest and penalties) to any governmental entity and as to which the Debtors are the primary obligors. Nothing herein shall in any way limit any rights to indemnification of any post-Effective Date directors, officers and/or employees with respect to any taxes owed by the Reorganized Debtors with respect to the period subsequent to the Effective Date. c) Exhibit B to the Plan of Reorganization shall be replaced in its entirety with Exhibit B annexed hereto. EXHIBIT B NEW SENIOR SECURED NOTES TERM SHEET** ISSUE: Senior Secured Cash / PIK Notes ("Senior Secured Notes") ISSUER: Loral Skynet Corporation ("New Skynet" or "Issuer") PARTIES: New Skynet GUARANTORS: The following shall be required to be guarantors in respect of the Senior Secured Notes: (1) all of the domestic, wholly owned and (subject to obtaining required consents) majority owned, current and future, subsidiaries of New Skynet and (2) Loral Asia Pacific Satellite (HK) Limited; provided, however, that no Unrestricted Subsidiary, including without limitation, each of XTAR, LLC, XTAR Services LLC and their respective successors (other than the Issuer or any Restricted Subsidiary) (collectively, the "XTAR Subs"), shall be required to be a guarantor for so long as such entity remains an Unrestricted Subsidiary. The Board of Directors of the Issuer (the "Board") may designate to be an Unrestricted Subsidiary any Subsidiary that is not a "Significant Subsidiary" within the meaning of Rule 1-02 under Regulation S-X promulgated by the Securities and Exchange Commission. In the case of any non-wholly owned subsidiary, in the event the consent of any third party is required to grant any such guaranty, New Skynet shall use its Commercially Reasonable Efforts (as defined on Annex B-1 hereto) to obtain such consent. SECURITY: Except for the assets described on Annex B-2 hereto (the "Excluded Collateral"), all of the assets of New Skynet will be direct collateral and all of the assets of each of the Guarantors will be collateral for the secured guarantees (subject, in both instances, to applicable governmental regulations); provided, however, that the Issuer and the Guarantors shall have no obligation to take any action under any foreign law to create or perfect any security interest in any asset (other than satellites and transponders) located outside the United States [or in any securities of entities not organized under the laws of the United States, any state thereof or the District of Columbia(1)], and the Issuer and the Guarantors, as applicable, shall have until the number of days described in Schedule 1 to - -------------------- ** This term sheet replaces the form of term sheet for the Senior Secured Notes filed on June 28, 2005 as Exhibit B of the Plan. This term sheet is a summary of the principal terms of the form of indenture for the Senior Secured Notes filed on June 28, 2005 as part of the Plan Supplement (the "Indenture"). For a complete description of the rights and obligations in respect of the new Senior Secured Notes, reference is made to the Indenture which is incorporated herein by reference and which you are encouraged to read in its entirety. Capitalized terms used in this Exhibit B and not otherwise defined herein shall have the meanings ascribed thereto in the Indenture. In the event of any inconsistency between this term sheet and the final Indenture executed by the Issuer and the Trustee, such final Indenture shall govern in all respects. (1) To be included in final Indenture. the Indenture after the date on which the Senior Secured Notes are first issued (the "Issue Date") to perfect the security interest in certain collateral specified in such schedule. In the event that New Skynet or any Guarantor is required to obtain the consent of any third party to pledge collateral material to the business of the Company and its Subsidiaries taken as a whole, New Skynet or the applicable Guarantor shall use its Commercially Reasonable Efforts to obtain such consent but shall not be required to seek such consent to the extent that the provisions of Sections 9-406 through 9-409 of the applicable Uniform Commercial Code permit the granting of the lien on and security interest in such item of collateral without the consent of such third party (even if enforcement of the Lien and rights and obligations of the parties to such item of collateral remain unaffected) [and shall not be required to seek consent as to any Collateral that is not material(2)]. The Indenture permits the Issuer and the Guarantors to incur certain additional indebtedness, including secured indebtedness. Under certain circumstances collateral securing additional indebtedness may become Excluded Collateral, and, accordingly, will not be collateral under the Indenture. These circumstances include the incurrence of liens set forth in clauses (vi), (xviii) and (xxi) of the definition of "Permitted Liens" set forth in Annex B-3 hereto. Under certain other circumstances the lien under the Indenture securing the Senior Secured Notes may be made junior to the lien securing such permitted secured indebtedness. Under such circumstances the Trustee will be required upon the request of the Issuer to execute such subordination and intercreditor agreements as are requested by the persons providing the permitted secured debt financing. RANKING: Senior secured debt of the Issuer and each of the Guarantors. Since not all New Skynet subsidiaries will be Guarantors and the restrictive covenants will permit non-guarantor subsidiaries to incur significant amounts of debt, the Senior Secured Notes may be structurally subordinated to material amounts of debt, and will be effectively subordinated to debt secured by Permitted Liens. PRINCIPAL: $126.0 million, including the Backstop Fee referred to in the Plan. INTEREST: 14.0% per annum, payable semi-annually in cash, in arrears, subject to the following: - Interest shall be payable in kind to the extent that the amount of any such interest would exceed the amount that equals the product of (A) 50.0% of New Skynet's 12-month Adjusted EBITDA for the period ending as of the end of the most recently completed quarter which ended at least 50 days prior to the date of Interest Determination (as defined below) immediately preceding such Mandatory PIK Date, which Adjusted EBITDA amount shall be annualized as necessary (and certified by the Chief Financial Officer of New Skynet), multiplied by (B) a fraction the numerator - -------------------- (2) To be included in final Indenture. of which is the number of days from and including the last Mandatory PIK Date (as defined below) (or in the case of the first interest payment date, from and including the Issue Date) to but not including the current Mandatory PIK Date, and the denominator of which is 365 or 366 days, as applicable. "ADJUSTED EBITDA" AND RELATED DEFINITIONS HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM IN SECTION 1.01 OF THE INDENTURE. - As used herein, "Mandatory PIK Date" means each interest payment date on which the Issuer is required to pay interest in kind pursuant to the immediately preceding provision. - As used herein, "Capital Stock" of any person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such person, including any preferred stock, partnership interests and limited liability company interests but excluding any debt securities convertible into such equity. - As used herein, "Disqualified Stock" means, with respect to any person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event: (1) matures or is mandatorily redeemable (other than redeemable only for Capital Stock of such person which is not itself Disqualified Stock) pursuant to a sinking fund obligation or otherwise; (2) is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock; or (3) is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise, in whole or in part; in each case on or prior to the date that is 367 days after the stated maturity of the Notes; provided, however, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such person to purchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the first anniversary of the stated maturity of the Senior Secured Notes shall not constitute Disqualified Stock if: (A) the "asset sale" or "change of control" provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the terms applicable to the Senior Secured Notes; and (B) any such requirement only becomes operative after compliance with such terms applicable to the Senior Secured Notes, including the purchase of any Senior Secured Notes tendered pursuant thereto. - Before any interest payment date, the Board may determine, that any portion or all of such interest that would otherwise be payable in cash will be paid in kind and not in cash (the "Interest Determination"). - If the Interest Determination is that the interest be paid in cash, then the interest will be payable only in cash. If the Interest Determination is that any portion or all of the interest be paid in kind, although otherwise such interest or portion thereof would be payable in cash (in accordance with the above), a notice of such Interest Determination will be sent to holders of the Senior Secured Notes. If within 10 business days following the date such notice is deemed delivered to the holders of the Senior Secured Notes, written notice is received by the Issuer from the holders of at least two-thirds of the aggregate outstanding principal amount of the Senior Secured Notes ("Noteholders' Notice") demanding that all of the interest (that otherwise would have been payable in cash but for the Interest Determination) be paid in cash and not in kind, then all of the interest will be paid in cash. If the Noteholders' Notice is not received by the Issuer by such 10 business days period, then the interest will be paid in kind. DEFAULT INTEREST: Interest plus 2.0% on overdue amounts MATURITY DATE: 10 years from the Issue Date USE OF PROCEEDS: Funds will be used to: (i) purchase substantially all non-Orion FSS assets and (ii) fund the cash portion of the distributions to be made to the SSL and SpaceCom creditors. Any surplus will be used for general corporate purposes. REDEMPTION: - During the first 48 months after the effective date of the plan of reorganization, the Issuer will have a limited right to optionally redeem the Senior Secured Notes. During this 48 months period the Board may determine to redeem the Senior Secured Notes, in whole or in part, at a redemption price of 110.0%, plus accrued and unpaid interest, but the Issuer may not consummate such redemption if the Issuer, after notice to the holders of the Senior Secured Notes, receives a Noteholders' Notice demanding that redemption not be effected. - At any time after the first 48 month period, the Senior Secured Notes will be redeemable at the Issuer's option, in whole or in part, at the following redemption prices, plus accrued and unpaid interest, if redeemed during the 12-month period commencing on the anniversary date of the Issue Date during the years set forth below: - 2009 110.0% - 2010 108.0% - 2011 106.0% - 2012 104.0% - 2013 102.0% - 2014 100.0% MANDATORY REDEMPTION: Holders of the Senior Secured Notes shall have the right to require the Issuer to repurchase the Senior Secured Notes (i) following certain asset sales, at 100% of net proceeds in excess of $150.0 million (subject to reinvestment of proceeds) and (ii) following a change of control, at the following redemption prices, plus accrued and unpaid interest: - 2005 104.0% - 2005 103.0% - 2007 102.0% - 2008 and thereafter 101.0% RESTRICTIVE COVENANTS: Limitations imposed on New Skynet and the Restricted Subsidiaries shall include, without limitation, the following, which are materially less restrictive than covenants typically found in high yield indentures. Additional limitations imposed on New Skynet and the Restricted Subsidiaries are set forth in the Indenture. - Limitation on incurrence of additional indebtedness, with exceptions for among other things (i) indebtedness after giving effect to the incurrence of which the Issuer's ratio of EBITDA to Consolidated Cash Interest Expense is less than 1.25 to 1, (ii) $200.0 million of indebtedness under applicable Credit Facilities (as defined in Annex B-4 hereto), (iii) a general basket of $125.0 million, (iv) a debt basket to finance the purchase, construction, launch, insurance for and other costs with respect to two additional satellites at any given time after the Issue Date and (v) an acquired debt basket - Limitation on restricted payments, with exceptions for among other things (i) a general basket of $200.0 million, (ii) certain permitted investments, including a general basket of $50.0 million and (iii) dividends on and purchases, repurchases and redemptions of the Issuer's Series A Preferred Stock - Limitation on asset sales, with exceptions for, among other things, any disposition in any single transaction or a group of related transactions of assets, including transponders, with a fair market value of less than $100.0 million - Limitation on dividend and other payment restrictions affecting Restricted Subsidiaries - Limitation on issuance and sale of capital stock of Restricted Subsidiaries - Limitation on liens, subject to Permitted Liens - Merger, consolidation and other business combinations - Limitation on transactions with affiliates, with exceptions for, among other things, (i) any transaction between (a) the Issuer or any Restricted Subsidiary and (b) any other Group Member (including Parent and Space Systems/Loral, Inc.) entered into in good faith, (ii) any transaction involving the construction, design, development, purchase or acquisition of a satellite and related assets of any Group Member, (iii) any management agreement, tax sharing agreement and shared services agreement with any Group Member - Limitation on designation of Unrestricted Subsidiaries For all purposes under the Indenture, including voting, MHR Fund Management LLC and any successor thereto (collectively, "MHR"), together with all related parties thereto (collectively with MHR, the "Permitted Holders"), shall be deemed not to be affiliates of the Issuer, any direct or indirect parent of the Issuer and each of their respective direct or indirect subsidiaries. EVENTS OF DEFAULT: Events of default similar to, but less stringent than, those found in high-yield securities ACCELERATION: The Senior Secured Notes may be accelerated upon the occurrence of an event of default (subject, in certain cases, to grace periods), and where acceleration is not automatic, by the vote of holders of at least forty percent (40%), unless such vote for acceleration is rescinded by the vote of holders of at least a majority of the then outstanding aggregate principal amount of the Senior Secured Notes INFORMATION REQUIREMENTS: The Indenture does not require the Issuer to deliver financial statements to holders of the Senior Secured Notes or otherwise make them publicly available unless and until it becomes required to do so under applicable securities laws. ANNEX B-1 Commercially Reasonable Efforts "COMMERCIALLY REASONABLE EFFORTS" means efforts that are reasonable under the circumstances as determined in good faith by the Board of Directors of the Company. Such efforts do not, in any event, include the payment of money or the making of concessions by the Company or any Subsidiary (or any Affiliate or Permitted Holder) in order to obtain such concessions or making efforts to obtain consent or approval if in good faith the Board of Directors determines that such efforts are unlikely to be successful. ANNEX B-2 Excluded Collateral 1. any contract, agreement or instrument that by its terms would be violated, breached or terminated by an assignment as collateral under any collateral documentation (other than to the extent that such terms prohibiting such assignment in any contract, agreement or instrument would be rendered ineffective pursuant to certain provisions of the applicable Uniform Commercial Code and other than to the extent that the Issuer has obtained a consent from the relevant counterparty to such assignment) 2. any property subject to a lien permitted by clauses (iii), (iv), (vi), (ix), (xiii), (xvii), (xviii), (xix), (xx) and (xxi) of the definition of Permitted Liens in Annex B-3, to the extent that the contractual arrangements governing such Lien prohibit the granting of a security interest hereunder in such property; 3. assets sold to a person which is not the Issuer or a Restricted Subsidiary in compliance with the Indenture 4. assets owned by a Restricted Subsidiary after the sale of such person or the release of the Guarantee of such person or the release of liens on such assets, in each case in compliance with the Indenture 5. any domestic deposit account (i) for which the trustee under the Indenture is the depositary and (ii) of which all or a substantial portion of the funds on deposit are used for funding (w) payroll, (x) 401(k) and other retirement plans and employee benefits, including rabbi trusts for deferred compensation, (y) health care benefits, and (z) escrow arrangements (e.g., environmental indemnity accounts) or (iii) without duplication, with an aggregate average ten consecutive business day daily balance of all funds in all such other domestic deposit accounts for all the Issuer and the Guarantors not in excess of $2.0 million. 6. any individual parcel of owned real estate with a fair market value, as reasonably determined in good faith by the Issuer, not in excess of $1.0 million 7. any real estate leasehold interest 8. any outstanding stock of a direct or indirect foreign subsidiary of the Issuer in excess of 65% of the total combined voting stock (as determined for United States federal income tax purposes) of such foreign subsidiary 9. any property of any foreign subsidiary that is a Guarantor which requires governmental regulatory approval for such Guarantor to grant the lien on such collateral so long as the Guarantor is using or has used Commercially Reasonable Efforts to obtain such consent 10. any letter of credit rights for a specified purpose to the extent the beneficiary is required by applicable law to apply the proceeds of such letter of credit rights for a specified purpose 11. any assets securing indebtedness of a Restricted Subsidiary incurred before it became such to the extent the documents securing such indebtedness prohibit such assets from securing other indebtedness, but only to the extent that the consolidated coverage ratio of the Issuer after acquisition of the new Restricted Subsidiary is equal to or greater than such ratio prior to such acquisition 12. cash deposits, not exceeding $5.0 million at any time, securing hedging obligations permitted under the Indenture 13. assets subject to the Amended and Restated Satellite Agreement dated August 26, 2003, as amended, by and between the Issuer and APT Satellite Company Limited, until such time as the requirements set forth in Section 13 thereof have been satisfied 14. any collateral provided pursuant to that certain Security Agreement dated October __, 2004 entered into among the Issuer, APT Satellite Company Limited and Bank of China (Hong Kong) Limited 15. equity interests in Earth Station Ecuador CIA Ltda. 16. other assets designated from time to time by the Issuer with a fair market value as determined in good faith by the Issuer in the aggregate for all assets designated not to exceed $5.0 million 17. transponders on Telstar 18 that are subject to the leasehold or ownership interest of APT Satellite Company Limited and the common elements on the satellite associated therewith ANNEX B-3 Permitted Liens "Permitted Liens" means (i) liens for taxes, assessments, governmental charges or claims with respect to amounts not yet delinquent or amounts being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (ii) contractual, statutory and common law liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (iii) liens on cash or cash equivalents incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (iv) liens on cash or cash equivalents incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers' acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (v) easements, rights-of-way, municipal and zoning ordinances and similar charges, encumbrances, title defects or other irregularities affecting real property that do not, individually or in the aggregate, materially interfere with the ordinary course of business of the Issuer or any of its Restricted Subsidiaries; (vi) liens (including extensions and renewals thereof) upon real or personal property acquired after the Issue Date; provided that (a) such lien is created solely for the purpose of securing Indebtedness incurred, in accordance with the covenant in the Indenture regarding Limitations on Indebtedness, to finance (or refinance) the cost (including the cost of improvement, transportation, development and design, installation, integration or construction) of the item of property or assets subject thereto and such lien is created prior to, at the time of or within 6 months after the later of the acquisition, the completion of construction or the commencement of full operation of such property, (b) the principal amount of the Indebtedness secured by such lien does not exceed 100% of such cost (plus, in the case of any refinancing Indebtedness referred to above, premiums, accrued interest, fees and expenses), and (c) any lien permitted by this clause shall not extend to or cover any property or assets other than such item of property or assets, any improvements on such item, and proceeds thereof; (vii) leases or subleases of real property granted to others that do not materially interfere with the ordinary course of business of the Issuer and its Restricted Subsidiaries; (viii) any interest or title of a lessor in the property subject to any capitalized lease or operating lease; (ix) liens on property of, or on shares of Capital Stock or indebtedness of, any person existing at the time such person becomes, or such property becomes a part of, any Restricted Subsidiary; provided that such liens (a) do not extend to or cover any property or assets of the Issuer or any Restricted Subsidiary other than the property or assets so acquired and (b) were not incurred in contemplation of the acquisition thereof; (x) liens in favor of the Issuer or any Restricted Subsidiary; (xi) liens arising from the rendering of a final judgment or order against the Issuer or any Restricted Subsidiary that does not give rise to a Default or an Event of Default provided that any reserve or other appropriate provision that shall be required in conformity with GAAP shall have been made therefor; (xii) liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods with respect to amounts not yet delinquent or amounts being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (xiii) liens upon a satellite and components thereof during the period in which such satellite is being constructed, provided that (a) such liens (1) are for the benefit of only the manufacturer of such satellite or components and (2) secure only the obligation of the Issuer or any Restricted Subsidiary to pay the purchase price for such satellite or components and (b) such liens are actually released upon, or prior to, the completion of construction of such satellite and prior to the launch or commencement of full operations of such satellite; (xiv) liens securing the Senior Secured Notes; (xv) liens arising under the Indenture in favor of the Trustee for its own benefit and similar liens in favor of other trustees, agents and representatives arising under instruments governing Indebtedness permitted to be incurred under the Indenture, provided, that such liens are solely for the benefit of the trustees, agents, or representatives, in their capacities as such and not for the benefit of the holders of such Indebtedness; (xvi) set-off, chargeback and other rights of depositary and collection banks and other regulated financial institutions with respect to money or instruments of the Issuer or its Restricted Subsidiaries on deposit with or in the possession of such institutions; (xvii) liens arising from the deposit of funds or securities in trust for the purpose of decreasing or defeasing Indebtedness so long as such deposit of funds or securities and such decreasing or defeasing of Indebtedness are permitted under the covenant in the Indenture regarding Limitations on Restricted Payments; and (xviii) liens securing indebtedness incurred pursuant to and in compliance with Section 4.06(b)(1) of the Indenture; (xix) liens on transponders leased by the Issuer or a Restricted Subsidiary to customers to secure obligations to such customers under such leases; (xx) liens, in addition to those provided for in the foregoing clauses (i) through (xix) securing obligations valued in good faith by the Board of Directors of the Issuer to be in an aggregate amount not to exceed $40.0 million; and (xxi) liens on existence on the Issue Date. ANNEX B-4 Credit Facilities "Credit Facilities" means one or more debt facilities, capital markets transactions or commercial paper facilities or any other agreement or instrument providing for or evidencing the extension of credit with banks, finance companies, funds, insurance companies, vendors or institutional lenders providing revolving credit loans, term loans, notes, bonds, debentures, receivables financing (including through the sale of receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. EX-2.3 3 y11548exv2w3.txt BANKRUPTCY COURT ORDER EXHIBIT 2.3 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - ------------------------------------------x : In re : Chapter 11 Case Nos. : LORAL SPACE : LEAD CASE 03-41710 (RDD) & COMMUNICATIONS LTD., et al., : 03-41709 (RDD) through : 03-41728 (RDD) Debtors. : (Jointly Administered) : - ------------------------------------------x ORDER CONFIRMING DEBTORS' FOURTH AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE, AS MODIFIED The Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated June 3, 2005, having been filed with the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") by Loral Space & Communications Ltd. ("Loral Ltd.") and its affiliated debtors in the above referenced chapter 11 cases (collectively, the "Debtors")(3); and the Plan Documents (as such documents have been or may be further amended or supplemented, the "Plan Supplement") having been filed with the Bankruptcy Court by the Debtors on June 29, 2005; and the Bankruptcy Court having entered, after due notice and a hearing, an Order, dated June 3, 2005, (i) Approving the Notice of the Disclosure Statement Hearing; (ii) Approving the Disclosure Statement; (iii) Fixing a Record Date; (iv) Approving the Notice and Objection Procedures in Respect of Confirmation of the Plan; - -------------------- (3) Such plan, as amended and modified as provided herein, is hereinafter referred to as the "Plan of Reorganization." Unless otherwise defined herein, capitalized terms shall have the meanings ascribed to such terms in the Plan of Reorganization. A copy of the Plan of Reorganization is annexed hereto as Exhibit A. (v) Approving Solicitation Packages and Procedures for the Distribution Thereof; (vi) Approving the Forms of Ballots and Establishment of Procedures for Voting on the Plan and Setting Date for Hearing on Confirmation of Plan; (vii) Approving the Form of Notices to Non-Voting Classes Under the Plan; and (viii) Approving the Subscription Form for Purposes of the Rights Offering (the "Disclosure Statement Order"); and the Disclosure Statement for Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the "Disclosure Statement") and the Plan of Reorganization and the Solicitation Packages (as defined below) having been distributed to holders of Claims entitled to vote thereon as provided in the Disclosure Statement Order; and due notice of (i) entry of the Disclosure Statement Order, (ii) the Confirmation Hearing, (iii) the deadline for voting on, and/or objecting to, the Plan of Reorganization having been provided to holders of Claims against and Equity Interests in the Debtors and other parties in interest in accordance with the Disclosure Statement Order, the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), as established by the affidavits of service, mailing, and/or publication filed with the Bankruptcy Court (collectively, the "Notice Affidavits"),(4) and (iv) the final date by which a holder of an Orion General Unsecured Claim may elect to subscribe to the Rights Offering, including the subsequent notice of this extended deadline, having been filed with the Bankruptcy Court on July 1, 2005, and such notice - -------------------- (4) The Notice Affidavits include the following: (i) Affidavit of Publication of The Wall Street Journal (Global), sworn to on June 9, 2005 by Mike Henley, Advertising Clerk of the Publisher of The Wall Street Journal (Global), and filed with the Court on June 14, 2005 [Docket No. 2092]; (ii) Affidavit of Publication of The New York Times, sworn to on June 9, 2005 by Jo Sniderski, Principal Clerk of the Publisher of The New York Times, and filed with the Court on June 14, 2005 [Docket No. 2093]; (iii) Affidavit of Publication of the International Herald Tribune, sworn to on June 13, 2005 by Judith King, principal and Legal Notice Manager of the International Herald Tribune, and filed with the Court on June 14, 2005 [Docket No. 2094]; and (iv) Affidavit of Service of Jane Sullivan of Financial Balloting Group LLC, sworn to on June 15, 2005, and filed with the Court on June 16, 2005 [Docket No. 2105]. being sufficient under the circumstances and no other or further notice being required; and the Disclosure Statement (with the Plan of Reorganization annexed thereto as Exhibit A) and the Plan Supplement having been posted at www.bsillc.com in accordance with the Disclosure Statement Order; and after full consideration of (i) the Debtors' Memorandum of Law in Support of Confirmation of Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated July 12, 2005, (ii) the certification filed by the Debtors' Bankruptcy Court-appointed voting and tabulation agent, Financial Balloting Group LLC ("FBG"), dated July 11, 2005, regarding the methodology applied to the tabulation of the voting results and the voting results with respect to Plan of Reorganization (the "Voting Affidavit"), (iii) each of the responses, objections and reservations filed by certain parties (collectively, the "Objectors") with respect to confirmation of the Plan of Reorganization, including (a) the Objection to Confirmation on the Basis That Fees Assessed by Professionals Representing Debtor/Creditor Entity as Well as Significant Post-Petition Increases in Executive Compensation of the Debtor Have Been Improperly Charged to the Debtor. The Values of the Debtor Have Contracted, Hence These Fees and Excessive Compensation Should Be Disgorged During the Post-Petition Period and Returned to the Estates at Confirmation Which Is to Be Heard on July 13, 2005, dated July 13, 2005 [Docket No. 2176] (the "LSPC Fee Objection"), filed by Tony Christ on behalf of the unofficial Loral Stockholders Protective Committee (the "LSPC"), (b) the Letter from Margaret & William Harrison, dated July 2, 2005 [Undocketed] (the "Harrison Letter"), (c) the ERISA Plaintiffs' Objection to Confirmation of Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated July 7, 2005 [Docket No. 2158] (the "ERISA Objection"), (d) the Oracle Corporation's Objection to Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated July 7, 2005 [Docket No. 2159] (the "Oracle Objection"), (e) the Objection of the Official Committee of Equity Security Holders (the "Equity Committee") to Confirmation of the Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated July 7, 2005 [Docket No. 2160] (the "Equity Committee's Objection"), (f) the Limited Objection of the LM Entities to Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 2170] (the "LM Objection"), (g) the Reservation of Rights of MHR Fund Management LLC in Connection With the Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated July 8, 2005 [Docket No. 2168] (the "MHR Reservation"), (h) the Motion Objecting to Feasibility Under 1129(a) (11) of the Fourth Amended Plan & Disclosure Statements or the Plan Significantly Understates Loral's Values, the Fiduciaries Have Not Shown Adequate Duty or Care, dated July 11, 2005 [Undocketed] (the "LSPC Confirmation Objection"), and (i) the Report of Findings from Loral Ltd. Contracts for Satellites and Services in Support of the LSPC's Opposition to Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, undated [Undocketed] (the "Ivaldy Pleading;" and, together with the LSPC Fee Objection, the Harrison Letter, the Oracle Objection, the Equity Committee's Objection, the LM Objection, the MHR Reservation and the LSPC Confirmation Objection, collectively, the "Objections"), (iv) the responses to the Objections filed with the Bankruptcy Court, including (x) the Debtors' Omnibus Response to Objections to Confirmation of the Plan, dated July 12, 2005, and (y) the Official Committee of Unsecured Creditors' Memorandum of Law in Support of Confirmation of Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, Omnibus Reply to Plan Confirmation Objections and Objection to Motion for Leave to Prosecute Claim, dated July 12, 2005; and the hearing to consider confirmation of the Plan of Reorganization having been held before the Bankruptcy Court on July 13, 15, 18, 19, 20, 21 and 25, 2005 (the "Confirmation Hearing"); and the Bankruptcy Court having reviewed and considered the Plan of Reorganization, the Disclosure Statement, the Disclosure Statement Order, the Plan Supplement, the Objections and the responses thereto and all related documents; and the appearance of all interested parties having been duly noted in the record of the Confirmation Hearing, including the testimony therein and the exhibits admitted into evidence; and upon all of the proceedings had before the Bankruptcy Court and upon the entire record of the Confirmation Hearing; and the Bankruptcy Court having determined based upon all of the foregoing that the Plan of Reorganization should be confirmed, as reflected by the Bankruptcy Court's rulings made herein and on the record of the Confirmation Hearing including, without limitation, the Bankruptcy Court's decision (the "Decision") rendered at the conclusion of the Confirmation Hearing on July 25, 2005; and after due deliberation and sufficient cause appearing therefor, it hereby is DETERMINED, FOUND, ADJUDGED, DECREED: FINDINGS OF FACT A. Findings. The findings set forth herein and in the record of the Confirmation Hearing constitute the Bankruptcy Court's findings of fact pursuant to Rule 52 of the Federal Rules of Civil Procedure, as made applicable herein by Bankruptcy Rules 7052 and 9014. To the extent any of the following findings of fact constitute conclusions of law, they are adopted as such. B. Exclusive Jurisdiction, Venue, Core Proceeding (28 U.S.C. Sections 157(b)(2), 1334(a)). This Court has jurisdiction over the Debtors' Reorganization Cases, the confirmation of the Plan of Reorganization and the Objections pursuant to 28 U.S.C. Section 1334. Confirmation of the Plan of Reorganization is a core proceeding pursuant to 28 U.S.C. Section 157(b), and this Court has jurisdiction to enter a final order with respect thereto. Venue is proper before this Court pursuant to 28 U.S.C. Sections 1408 and 1409. C. Commencement of the Reorganization Cases. On July 15, 2003 (the "Commencement Date"), the Debtors commenced with this Court voluntary cases under chapter 11 of the Bankruptcy Code. By Order of this Court, dated July 15, 2003, the Reorganization Cases were consolidated for procedural purposes only and have been jointly administered. The Debtors have operated their businesses and managed their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee has been appointed in these cases. D. Judicial Notice. The Bankruptcy Court takes judicial notice of the docket of the Debtors' Reorganization Cases maintained by the Clerk of the Bankruptcy Court, including, without limitation, all pleadings and other documents filed, all orders entered, and all evidence and arguments made, proffered, adduced and/or presented at the hearings held before the Bankruptcy Court during the pendency of the Reorganization Cases. E. Burden of Proof. The Debtors have met their burden of proving the elements of sections 1129(a) and (b) of the Bankruptcy Code by a preponderance of the evidence. F. Solicitation and Notice. On June 3, 2005, the Bankruptcy Court entered the Disclosure Statement Order, which, among other things, approved the Disclosure Statement, finding that it contained "adequate information" within the meaning of section 1125 of the Bankruptcy Code, and established procedures for the Debtors' solicitation of votes on the Plan of Reorganization. The (a) Disclosure Statement, (b) Disclosure Statement Order, (c) Notice of (i) Approval of Disclosure Statement; (ii) Establishment of Record Date; (iii) Hearing on Confirmation of the Plan and Procedures for Objecting to Confirmation of the Plan; and (iv) Procedures and Deadline for Voting on the Plan (the "Confirmation Hearing Notice"), (d) Ballots and (e) Subscription Forms (collectively, the "Solicitation Packages") were served in compliance with the Bankruptcy Rules and the Disclosure Statement Order. As described in the Disclosure Statement Order and as evidenced by the Notice Affidavits, (i) the service of the Solicitation Packages was adequate and sufficient under the circumstances of these Reorganization Cases, and (ii) adequate and sufficient notice of the Confirmation Hearing and other requirements, deadlines, hearings and matters described in the Disclosure Statement Order was timely provided in compliance with the Bankruptcy Rules, and provided due process to all parties in interest. G. As is evidenced by the Notice Affidavits, all parties required to be provided notice of the Confirmation Hearing (including the deadline for filing and serving objections to confirmation of the Plan of Reorganization) have been given due, proper, timely and adequate notice in compliance with the Bankruptcy Code, the Bankruptcy Rules and the Disclosure Statement Order, and have had an opportunity to appear and be heard with respect thereto. No other or further notice is required. H. Voting. Votes on the Plan of Reorganization were solicited after disclosure of "adequate information" as defined in section 1125 of the Bankruptcy Code. As evidenced by the Voting Affidavit, votes to accept or reject the Plan of Reorganization have been solicited and tabulated fairly, in good faith and in a manner consistent with the Disclosure Statement Order, the Bankruptcy Code and the Bankruptcy Rules. I. Plan Supplement. On June 29, 2005, the Debtors filed the Plan Supplement, which includes the following documents: (i) draft New Skynet Notes Indenture, (ii) Form of New Skynet Note, (iii) Registration Rights Agreement (New Loral Common Stock, New Skynet Preferred Stock and New Skynet Notes), (iv) Subscription Forms for Rights Offering, (v) New Loral Certificate of Incorporation, (vi) New Loral Bylaws, (vii) New Skynet Certificate of Incorporation, (viii) Certificate of Designation of New Skynet Preferred Stock, (ix) New Skynet Bylaws, (x) New SS/L Certificate of Incorporation, (xi) New SS/L Bylaws, (xii) Loral SpaceCom Corporation Certificate of Incorporation, (xiii) Loral SpaceCom Corporation Bylaws, (xiv) Loral Space & Communications Holdings Corporation (f/k/a Loral Space & Communications Corporation) Certificate of Incorporation, (xv) Loral Space & Communications Holdings Corporation (f/k/a Loral Space & Communications Corporation) Bylaws, (xvi) Certificate of Amendment to Certificate of Incorporation of (a) Loral Space & Communications Corporation (n/k/a Loral Space & Communications Holdings Corporation), (b) Loral Communications Services, Inc., (c) Loral CyberStar Services, Inc., (d) Loral Skynet Network Services, Inc. and (e) Loral CyberStar International, Inc., (xvii) Backstop Commitment Agreement, (xviii) New Management Stock Plan, (xix) Form of New Loral Employment Contract, (xx) Form of Employment Contract of Bernard L. Schwartz, (xxi) SERP Amendment, (xxii) List of Subsidiaries that Will Be Merged or Dissolved and Assets to Be Transferred, (xxiii) Schedule of Executory Contracts and Unexpired Leases to Be Assumed Pursuant to the Plan (Schedule 8.1 to the Plan of Reorganization) and (xxiv) List of Surviving Debtors Whose Organizational Documents Are Not Being Revised. In addition, on June 29, 2005 (as supplemented on June 30, 2005), an updated draft form of the Indenture for the New Skynet Notes (the "Indenture"), and a marked copy of the Indenture showing changes from the form Indenture that was filed as an Exhibit to the Form T-3 with the Securities and Exchange Commission, were each filed by the Debtors with this Court as an exhibit to the Plan Supplement. In addition, on or about July 1, 2005, the Debtors filed with this Court and sent to holders of Orion General Unsecured Claims the Notice of Extension of Subscription Expiration Date in Connection with the Debtors' Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code. Thereafter, the Debtors sent to each holder of an Orion General Unsecured Claim the following: (i) revised Subscription Forms in connection with the notice of the extension of the Subscription Expiration Date, and (ii) a revised term sheet (the "Revised Term Sheet") marked to show the significant differences between the terms contained in the term sheet attached as Exhibit B to the Plan of Reorganization and the terms of the Indenture filed as part of the Plan Supplement. In addition, a copy of the Revised Term Sheet and the Indenture was posted at www.bsillc.com. All such materials shall be included in the definition of Plan Supplement for purposes hereof. All such materials comply with the terms of the Plan of Reorganization, and the notice of such documents is good and proper in accordance with the Bankruptcy Code, the Bankruptcy Rules and the Disclosure Statement Order. MODIFICATIONS TO THE PLAN OF REORGANIZATION J. The following modifications are hereby made to the Plan of Reorganization: a) The Plan of Reorganization is modified to include the following Section: 11.12. LIMITATIONS ON EXCULPATION AND RELEASES OF REPRESENTATIVES. Nothing in Sections 11.8 or 11.9 of the Plan of Reorganization shall (i) be construed to release or exculpate any entity from fraud, malpractice, criminal conduct, intentional unauthorized misuse of confidential information that causes damages, or ultra vires acts, or (ii) limit the liability of the professionals of the Debtors, the Reorganized Debtors, the Creditors' Committee or the Equity Committee to their respective clients pursuant to DR 6-102 of the Code of Professional Responsibility. b) Section 8.7 of the Plan of Reorganization shall include the following additional language: Notwithstanding the provisions of Section 8.7 of the Plan of Reorganization, New Loral shall indemnify, hold harmless and reimburse all persons who are or were directors, officers and/or employees of the Debtors on the Commencement Date or at any time thereafter against and for any and all obligations incurred directly or indirectly with respect to any taxes owed by the Debtors for the period prior to the Effective Date (including interest and penalties) to any governmental entity and as to which the Debtors are the primary obligors. Nothing herein shall in any way limit any rights to indemnification of any post-Effective Date directors, officers and/or employees with respect to any taxes owed by the Reorganized Debtors with respect to the period subsequent to the Effective Date. c) Exhibit B to the Plan of Reorganization shall be replaced in its entirety with Exhibit B annexed hereto. K. The Plan of Reorganization, as modified by the above modifications (the "Modifications"), shall constitute the Plan of Reorganization. L. The Modifications do not adversely affect the treatment of any Claims against or Equity Interests in the Debtors under the Plan of Reorganization. M. In accordance with Bankruptcy Rule 3019, all holders of Claims against the Debtors who voted to accept the Plan of Reorganization are hereby deemed to have accepted the Plan of Reorganization as amended consistent with the Modifications. N. No holder of a Claim against the Debtors who has voted to accept the Plan of Reorganization shall be permitted to change its acceptance to a rejection as a consequence of the Modifications. O. The Debtors' disclosure of the Modifications, including on the record of the Confirmation Hearing, constitutes due and sufficient notice thereof. P. The Modifications incorporated in the Plan of Reorganization comply with section 1127 of the Bankruptcy Code and Bankruptcy Rule 3019. COMPLIANCE WITH THE REQUIREMENTS OF SECTION 1129 OF THE BANKRUPTCY CODE Q. Plan of Reorganization's Compliance With the Bankruptcy Code (11 U.S.C. Section 1129(a)(1)). The Plan of Reorganization complies with the applicable provisions of the Bankruptcy Code and, as required by Bankruptcy Rule 3016(a), the Plan of Reorganization is dated and identifies the Debtors as the Plan of Reorganization proponents, thereby satisfying section 1129(a)(1) of the Bankruptcy Code. R. Proper Classification (11 U.S.C. Sections 1122, 1123(a)(1)). As required by section 1123(a)(1) of the Bankruptcy Code, in addition to Administrative Expense Claims and Priority Tax Claims, which need not be classified, Section 3.1 of the Plan of Reorganization designates twenty-two (22) Classes of Claims against and Equity Interests in the Debtors, comprised of seventeen (17) Classes of Claims and five (5) Classes of Equity Interests. As required by section 1122(a) of the Bankruptcy Code, the Claims and Equity Interests placed in each Class are substantially similar to other Claims and Equity Interests, as the case may be, in each such Class. A reasonable basis exists for separately classifying the various Classes of Claims and Equity Interests under the Plan of Reorganization. The separate classification of various Claims and Equity Interests under the Plan of Reorganization is reasonable and necessary and complies with sections 1122 and 1123(a)(1) of the Bankruptcy Code. S. Specified Unimpaired Classes (11 U.S.C. Section 1123(a)(2)). Section 3.1 of the Plan of Reorganization specifies that Ltd. Class 1 (Other Priority Claims against the Ltd. Debtors), Ltd. Class 2 (Secured Tax Claims against the Ltd. Debtors),(5) Ltd. Class 3 (Secured Claim against - -------------------- (5) No holders of Claims in Ltd. Class 2 (Secured Tax Claims against the Ltd. Debtors), Orion Class 2 (Secured Tax Claims against the Orion Debtors) and SS/L Class 2 (Secured Tax Claims against the SS/L the Ltd. Debtors), Orion Class 1 (Other Priority Claims against the Orion Debtors), Orion Class 2 (Secured Tax Claims against the Orion Debtors), Orion Class 3 (Secured Claims against the Orion Debtors), Orion Class 5 (Orion Equity Interests), SpaceCom Class 1 (Other Priority Claims against the SpaceCom Debtors), SpaceCom Class 3 (Secured Claims against the SpaceCom Debtors), SpaceCom Class 4 (SpaceCom General Unsecured Claims), SpaceCom Class 5 (SpaceCom Equity Interests), SS/L Class 1 (Other Priority Claims against the SS/L Debtors), SS/L Class 2 (Secured Tax Claims against the SS/L Debtors), SS/L Class 3 (Secured Claims against the SS/L Debtors), SS/L Class 4 (SS/L General Unsecured Claims) and SS/L Class 5 (SS/L Equity Interests) are unimpaired under the Plan of Reorganization, thereby satisfying section 1123(a)(2) of the Bankruptcy Code. T. Specified Treatment of Impaired Classes (11 U.S.C. Section 1123(a)(3)). Section 3.1 of the Plan of Reorganization designates Ltd. Class 4 (Ltd. General Unsecured Claims), Ltd. Class 5 (Ltd. Preferred Stock Interests), Ltd. Class 6 (Ltd. Equity Interests), Ltd. Class 7 (Securities Litigation Claims), Orion Class 4 (Orion General Unsecured Claims) and SpaceCom Class 2 (Secured Tax Claims against the SpaceCom Debtors) as impaired, and Sections 4.4, 4.5, 4.6, 4.7, 4.11 and 4.14 of - ------------------------------------------------------------------------------- Debtors) voted to accept or reject the Plan of Reorganization. As authorized under Sections 4.2, 4.9 and 4.19 of the Plan of Reorganization, the Debtors have determined to pay holders of Allowed Secured Tax Claims against the Ltd. Debtors, the Orion Debtors and the SS/L Debtors, if any, in full, plus interest. As a result, Ltd. Class 2, Orion Class 2 and SS/L Class 2 are unimpaired and are deemed to have accepted the Plan. 11 U.S.C. Sections 1124 and 1126(f). the Plan of Reorganization, respectively, set forth the treatment of such impaired Claims and Equity Interests, thereby satisfying section 1123(a)(3) of the Bankruptcy Code. U. No Discrimination (11 U.S.C. Section 1123(a)(4)). Section 4 of the Plan of Reorganization provides for the same treatment by the Debtors for each Claim or Equity Interest in each respective Class unless the holder of a particular Claim or Equity Interest has agreed to a less favorable treatment of such Claim or Equity Interest, thereby satisfying section 1123(a)(4) of the Bankruptcy Code. V. Implementation of the Plan of Reorganization (11 U.S.C. Section 1123(a)(5)). Section 5 of the Plan of Reorganization provides for adequate means for implementation of the Plan of Reorganization with respect to each Debtor, thereby satisfying section 1123(a)(5) of the Bankruptcy Code. Specifically, the Plan of Reorganization and the various documents and agreements set forth in the Plan Supplement provide adequate and proper means for the implementation of the Plan of Reorganization, including (i) substantive consolidation of the Ltd. Debtors, the Orion Debtors, the SpaceCom Debtors and the SS/L Debtors, respectively, pursuant to section 105(a) of the Bankruptcy Code, effective as of the Effective Date, for all purposes related to the Plan of Reorganization, including, without limitation, for purposes of voting, confirmation and distribution, (ii) effectuation of the Restructuring Transactions, including the transfer of certain assets in connection therewith and the treatment of Debtor Intercompany Claims, including the reduction and discharge of such claims owed by Ltd. to Loral Satellite, Inc. (or its successor) and SpaceCom in accordance with the Restructuring Transactions, (iii) the Rights Offering, (iv) the issuance of the New Loral Common Stock, the New Skynet Preferred Stock and the New Skynet Notes and (v) the deemed automatic cancellation of the promissory notes, share certificates for the existing common stock of Loral Ltd., share certificates for the existing preferred stock of Loral Ltd., Ltd. Notes, Orion 10% Notes, Orion Stub Notes, the Indentures and other instruments evidencing any Claims or Equity Interests, provided, however, that the Ltd. Notes, Orion 10% Notes, Orion Stub Notes and Indentures shall remain in effect solely for the purposes of (a) allowing the holders of Note Claims to receive their distributions under the Plan of Reorganization, (b) allowing the Indenture Trustee to make distributions on account of the Ltd. Notes, Orion 10% Notes and Orion Stub Notes and (c) permitting each Indenture Trustee to assert its Charging Lien against such distributions for payment of the Indenture Trustee Fees. W. Nonvoting Equity Securities/Allocation of Voting Power (11 U.S.C. Section 1123(a)(6)). Section 10.3 of the Plan of Reorganization provides that the New Loral Certificate of Incorporation, the New Skynet Certificate of Incorporation and the Reorganized Subsidiary Debtors' Certificates of Incorporation shall contain provisions necessary to prohibit the issuance of nonvoting equity securities, thereby satisfying section 1123(a)(6) of the Bankruptcy Code. X. Designation of Directors and Officers (11 U.S.C. Section 1123(a)(7)). Section 10 of the Plan of Reorganization sets forth the procedures for the selection of directors and officers of the Reorganized Debtors that are consistent with the interests of creditors and equity security holders and public policy. On July 1, 2005, the Debtors timely filed with the Bankruptcy Court the List of Directors and Officers for the Reorganized Debtors in Connection with the Debtors' Fourth Amended Joint Plan Under Chapter 11 of the Bankruptcy Code (as amended on July 10, 2005, the "List of Directors and Officers"), which discloses, among other things, the names of the members of the initial New Loral Board, the initial New Skynet Board, the initial New SS/L Board, the initial Reorganized Subsidiary Debtors' Boards and the officers for the Reorganized Debtors. Section 1123(a)(7) of the Bankruptcy Code has been satisfied. Y. Additional Plan Provisions (11 U.S.C. Section 1123(b)). The provisions of the Plan of Reorganization are appropriate and consistent with the applicable provisions of the Bankruptcy Code, thereby satisfying section 1123(b) of the Bankruptcy Code. i. Impairment/Unimpairment of Any Class of Claims or Interests (Section 1123(b)(1)). Pursuant to Section 3.1 of the Plan of Reorganization, (i) Ltd. Class 4 (Ltd. General Unsecured Claims), Ltd. Class 5 (Ltd. Preferred Stock Interests), Ltd. Class 6 (Ltd. Equity Interests), Ltd. Class 7 (Securities Litigation Claims), Orion Class 4 (Orion General Unsecured Claims) and SpaceCom Class 2 (Secured Tax Claims against the SpaceCom Debtors) are impaired; and (ii) Ltd. Class 1 (Other Priority Claims against the Ltd. Debtors), Ltd. Class 2 (Secured Tax Claims against the Ltd. Debtors), Ltd. Class 3 (Secured Claim against the Ltd. Debtors), Orion Class 1 (Other Priority Claims against the Orion Debtors), Orion Class 2 (Secured Tax Claims against the Orion Debtors), Orion Class 3 (Secured Claims against the Orion Debtors), Orion Class 5 (Orion Equity Interests), SpaceCom Class 1 (Other Priority Claims against the SpaceCom Debtors), SpaceCom Class 3 (Secured Claims against the SpaceCom Debtors), SpaceCom Class 4 (SpaceCom General Unsecured Claims), SpaceCom Class 5 (SpaceCom Equity Interests), SS/L Class 1 (Other Priority Claims against the SS/L Debtors), SS/L Class 2 (Secured Tax Claims against the SS/L Debtors), SS/L Class 3 (Secured Claims against the SS/L Debtors), SS/L Class 4 (SS/L General Unsecured Claims) and SS/L Class 5 (SS/L Equity Interests) are unimpaired, as contemplated by section 1123(b)(1) of the Bankruptcy Code. ii. Assumption and Rejection of Executory Contracts (11 U.S.C. Section 1123(b)(2)). Section 8.1 of the Plan of Reorganization provides for the rejection of the executory contracts and unexpired leases of the Debtors as of the Effective Date, except for any executory contract or unexpired lease (i) that has been assumed pursuant to an order of the Bankruptcy Court entered prior to the Effective Date, (ii) as to which a motion for approval of the assumption of such executory contract or unexpired lease has been filed and served prior to the Confirmation Date, or (iii) that is specifically designated as an executory contract or unexpired lease to be assumed on Schedule 8.1 to the Plan of Reorganization. Z. The Debtors' Compliance With the Bankruptcy Code (11 U.S.C. Section 1129(a)(2)). The Debtors have complied with the applicable provisions of the Bankruptcy Code, except as otherwise provided or permitted by orders of the Bankruptcy Court. The Debtors have complied with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules and the Local Bankruptcy Rules for the Southern District of New York (the "Local Rules") in transmitting the Solicitation Packages and related documents and notices, and in soliciting and tabulating the votes on the Plan of Reorganization. AA. Plan of Reorganization Proposed in Good Faith (11 U.S.C. Section 1129(a)(3)). The Debtors have proposed the Plan of Reorganization in good faith and not by any means forbidden by law, thereby satisfying section 1129(a)(3) of the Bankruptcy Code. The Debtors' good faith is evident from the facts and record of these Reorganization Cases, the Disclosure Statement, and the record of the Confirmation Hearing and other proceedings held in these Reorganization Cases. The Plan of Reorganization was proposed with the legitimate and honest purpose of maximizing the value of the Debtors' estates and to effectuate a successful reorganization of the Debtors. The Plan of Reorganization was negotiated at arms'-length among representatives of the Debtors, the Creditors' Committee, the Backstop Purchasers and the ad hoc committee of certain trade creditors of Space Systems/Loral, Inc. and Loral SpaceCom Corporation. The Plan of Reorganization is supported by the Creditors' Committee and the Backstop Purchasers. Further, the Plan of Reorganization's classification, indemnification, exculpation, release and injunction provisions have been negotiated in good faith and at arms'-length, are each necessary for the Debtors' successful reorganization and are consistent with sections 105, 1122, 1123(b)(3)(A), 1129 and 1142 of the Bankruptcy Code. All Objections based on an alleged lack of good faith are overruled based on the Decision and the record of the Confirmation Hearing. BB. Payment for Services or Costs and Expenses (11 U.S.C. Section 1129(a)(4)). Any payment made or to be made by the Debtors, or by a person issuing securities or acquiring property under the Plan of Reorganization, for services or for costs and expenses in connection with the Reorganization Cases, or in connection with the Plan of Reorganization and incident to the Reorganization Cases, has been approved by, or is subject to the approval of, this Court as reasonable, thereby satisfying section 1129(a)(4) of the Bankruptcy Code. CC. Directors, Officers and Insiders (11 U.S.C. Section 1129(a)(5)). The Debtors have complied with section 1129(a)(5) of the Bankruptcy Code. The identity and affiliations of the persons proposed to serve as the initial directors and officers of the Reorganized Debtors after confirmation of the Plan of Reorganization have been fully disclosed, and the appointment to, or continuance in, such offices of such persons is consistent with the interests of holders of Claims against and Equity Interests in the Debtors and with public policy. The identity of any insider that will be employed or retained by the Reorganized Debtors and the nature of such insider's compensation have also been fully disclosed. DD. No Rate Changes (11 U.S.C. Section 1129(a)(6)). The Plan of Reorganization does not provide for rate changes subject to the jurisdiction of any governmental regulatory agency by the Reorganized Debtors. Accordingly, section 1129(a)(6) of the Bankruptcy Code is inapplicable to these Reorganization Cases. EE. Best Interests of Creditors (11 U.S.C. Section 1129(a)(7)). The Plan of Reorganization satisfies section 1129(a)(7) of the Bankruptcy Code. There was no objection to the Plan of Reorganization on this basis. The liquidation analyses provided in the Disclosure Statement, as supported by evidence proffered, adduced and/or presented at the Confirmation Hearing, including the claims that would arise upon the termination of the Debtors' businesses and the liquidation of their assets, (i) are persuasive and credible, (ii) have not been controverted by other evidence and (iii) establish that each holder of an impaired Claim or Equity Interest either has accepted the Plan of Reorganization or will receive or retain under the Plan of Reorganization, on account of such Claim or Equity Interest, property of a value, as of the Effective Date, that is not less than the amount that such holder would receive or retain if the Ltd. Debtors, the Orion Debtors, the SpaceCom Debtors and the SS/L Debtors, as applicable, were liquidated under chapter 7 of the Bankruptcy Code on such date. FF. Acceptance by Certain Classes (11 U.S.C. Section 1129(a)(8)). Ltd. Class 1 (Other Priority Claims against the Ltd. Debtors), Ltd. Class 2 (Secured Tax Claims against the Ltd. Debtors), Ltd. Class 3 (Secured Claims against the Ltd. Debtors), Orion Class 1 (Other Priority Claims against the Orion Debtors), Orion Class 2 (Secured Tax Claims against the Orion Debtors), Orion Class 3 (Secured Claims against the Orion Debtors), Orion Class 5 (Orion Equity Interests), SpaceCom Class 1 (Other Priority Claims against the SpaceCom Debtors), SpaceCom Class 3 (Secured Claims against the SpaceCom Debtors), SpaceCom Class 4 (SpaceCom General Unsecured Claims), SpaceCom Class 5 (SpaceCom Equity Interests), SS/L Class 1 (Other Priority Claims against the SS/L Debtors), SS/L Class 2 (Secured Tax Claims against the SS/L Debtors), SS/L Class 3 (Secured Claims against the SS/L Debtors), SS/L Class 4 (SS/L General Unsecured Claims) and SS/L Class 5 (SS/L Equity Interests) are Classes of unimpaired Claims and Equity Interests, as applicable, that are conclusively presumed to have accepted the Plan of Reorganization in accordance with section 1126(f) of the Bankruptcy Code. Ltd Class 4 (Ltd. General Unsecured Claims), Orion Class 4 (Orion General Unsecured Claims), and SpaceCom Class 2 (Secured Tax Claims against the SpaceCom Debtors) have voted to accept the Plan of Reorganization in accordance with sections 1126(b) and (c) of the Bankruptcy Code. Ltd. Class 5 (Ltd. Preferred Stock Interests), Ltd. Class 6 (Ltd. Equity Interest) and Ltd. Class 7 (Securities Litigation Claims) are impaired by the Plan of Reorganization and are not entitled to receive or retain any property under the Plan of Reorganization and, therefore, are deemed to have rejected the Plan of Reorganization pursuant to section 1126(g) of the Bankruptcy Code. Although section 1129(a)(8) of the Bankruptcy Code is not satisfied as a result of the deemed rejection of Ltd. Class 5, Ltd. Class 6 and Ltd. Class 7, the Plan of Reorganization may nevertheless be confirmed because the Plan of Reorganization satisfies section 1129(b) of the Bankruptcy Code with respect to Ltd. Class 5, Ltd. Class 6 and Ltd. Class 7. GG. Treatment of Administrative Expense Claims, Tax Claims and Other Priority Claims (11 U.S.C. Section 1129(a)(9)). The treatment of Allowed Administrative Expense Claims pursuant to Sections 2.1(a) - (d) of the Plan of Reorganization, and Priority Non-Tax Claims pursuant to Sections 4.1, 4.8, 4.13 and 4.18 of the Plan of Reorganization, satisfies the requirements of sections 1129(a)(9)(A) and (B) of the Bankruptcy Code. The treatment of Priority Tax Claims pursuant to Section 2.4 of the Plan of Reorganization satisfies the requirements of section 1129(a)(9)(C) of the Bankruptcy Code. HH. Acceptance By Impaired Class of Claims (11 U.S.C. Section 1129(a)(10)). At least one Class of impaired Claims against the Ltd. Debtors, the Orion Debtors, and the SpaceCom Debtors, respectively, has accepted the Plan of Reorganization, determined without including any acceptance of the Plan of Reorganization by insiders. Specifically, Ltd Class 4 (Ltd. General Unsecured Claims), Orion Class 4 (Orion General Unsecured Claims) and SpaceCom Class 2 (Secured Tax Claims against the SpaceCom Debtors) voted to accept the Plan of Reorganization by the requisite majorities mandated under section 1126 of the Bankruptcy Code, determined without including any acceptance of the Plan of Reorganization by any insider, thereby satisfying the requirements of section 1129(a)(10) of the Bankruptcy Code. Additionally, as there is no impaired Class of Claims against the SS/L Debtors, section 1129(a)(10) of the Bankruptcy Code is inapplicable thereto. II. Feasibility (11 U.S.C. Section 1129(a)(11)). The evidence proffered, adduced and/or presented at the Confirmation Hearing with respect to the showing required by section 1129(a)(11) of the Bankruptcy Code (i) is persuasive and credible, (ii) has not been controverted by other evidence and (iii) establishes that the Plan of Reorganization is feasible and that there is a reasonable prospect of the Reorganized Debtors being able to meet their financial obligations under the Plan of Reorganization and in the ordinary course of their businesses, and that confirmation of the Plan of Reorganization is not likely to be followed by the liquidation or the need for further financial reorganization of the Reorganized Debtors, thereby satisfying the requirements of section 1129(a)(11) of the Bankruptcy Code. JJ. Payment of Fees (11 U.S.C. Section 1129(a)(12)). Pursuant to Section 14.6 of the Plan of Reorganization, on the Effective Date, and thereafter as may be required, the Debtors shall pay all fees payable pursuant to section 1930, chapter 123, of title 28 of the United States Code, thereby satisfying the requirements of section 1129(a)(12) of the Bankruptcy Code. KK. Continuation of Retiree Benefits (11 U.S.C. Section 1129(a)(13)). Section 8.10 of the Plan of Reorganization provides that the Reorganized Debtors shall continue to pay all retiree benefits of the Debtors for the duration of the period for which the Debtors had obligated themselves to provide such benefits and subject to the right of the Reorganized Debtors to modify or terminate such retiree benefits in accordance with the terms thereof. Accordingly, the Plan of Reorganization satisfies the requirements of section 1129(a)(13) of the Bankruptcy Code. LL. No Unfair Discrimination; Fair and Equitable (11 U.S.C. Section 1129(b)). Ltd. Class 5 (Ltd. Preferred Stock Interests), Ltd. Class 6 (Ltd. Equity Interests) and Ltd. Class 7 (Securities Litigation Claims) (collectively, the "Rejecting Classes") are deemed to have rejected the Plan of Reorganization. Based upon the evidence proffered, adduced and/or presented at the Confirmation Hearing, the Plan of Reorganization does not discriminate unfairly and is fair and equitable with respect to the Rejecting Classes, as required by sections 1129(b)(1) and (b)(2) of the Bankruptcy Code, because there is no holder of any interest that is junior to any of the Rejecting Classes that is receiving or retaining any property under the Plan of Reorganization on account of such junior interest, and the holders of Claims in Classes senior to the Rejecting Classes are receiving distributions the value of which, on the Effective Date, is less than 100% of the allowed amount of their Claims. Thus, the Plan of Reorganization may be confirmed notwithstanding the deemed rejection by the Rejecting Classes, thereby satisfying the requirements of sections 1129(b)(1) and (b)(2) of the Bankruptcy Code. MM. Principal Purpose of the Plan of Reorganization (11 U.S.C. Section 1129(d)). The principal purpose of the Plan of Reorganization is not the avoidance of taxes or the avoidance of the application of Section 5 of the Securities Act of 1933, as amended, thereby satisfying the requirements of section 1129(d) of the Bankruptcy Code. NN. Good Faith Solicitation (11 U.S.C. Section 1125(e)). Based on the record before the Bankruptcy Court in these Reorganization Cases, (i) the Debtors are deemed to have solicited acceptances of the Plan of Reorganization in good faith and in compliance with the applicable provisions of the Bankruptcy Code, including without limitation, sections 1125(a) and (e) of the Bankruptcy Code, and any applicable non-bankruptcy law, rule, or regulation governing the adequacy of disclosure in connection with such solicitation and (ii) based on the foregoing, the Debtors, the members of the Creditors' Committee, the Backstop Purchasers and each of their respective affiliates, agents, directors, officers, employees, advisors and attorneys shall be deemed to have participated in good faith and in compliance with the applicable provisions of the Bankruptcy Code in the offer and issuance of any securities under the Plan of Reorganization, and therefore are not, and on account of such offer, issuance and solicitation will not be, liable at any time for any violation of any applicable law, rule, or regulation governing the solicitation of acceptances or rejections of the Plan of Reorganization or the offer, issuance, sale or purchase of any securities under the Plan of Reorganization. OO. Exculpation, Injunction and Releases. The Bankruptcy Court has jurisdiction under sections 1334(a) and (b) of title 28 of the United States Code to approve the exculpation, injunctions and releases set forth in Sections 11.8, 11.5 and 11.9 of the Plan of Reorganization, respectively. Section 105(a) of the Bankruptcy Code permits issuance of the injunctions and approval of the unopposed releases set forth in Sections 11.5 and 11.9 of the Plan of Reorganization, respectively, if, as has been established here, such provisions (i) are essential to the formulation and implementation of the Plan of Reorganization, as provided in section 1123 of the Bankruptcy Code, (ii) confer substantial benefits on the Debtors' estates, (iii) are fair and reasonable and (iv) are in the best interests of the Debtors, their estates and holders of Claims and Equity Interests. Further, the exculpation provision in the Plan of Reorganization does not relieve any party of liability for an act or omission to the extent such act or omission is determined by a Final Order to have constituted willful misconduct or gross negligence or the other exceptions set forth therein. Based upon the record of the Reorganization Cases and the evidence proffered, adduced and/or presented at the Confirmation Hearing, this Court finds that the exculpation, injunction and releases set forth in Section 11 of the Plan of Reorganization are consistent with the Bankruptcy Code and applicable law. PP. Satisfaction of Confirmation Requirements. Based upon the foregoing, the Plan of Reorganization satisfies the requirements for confirmation set forth in section 1129 of the Bankruptcy Code. QQ. Assumption of Executory Contracts and Unexpired Leases. The Debtors have satisfied the provisions of section 365 of the Bankruptcy Code with respect to the assumption and/or the assumption and assignment of executory contracts and unexpired leases pursuant to the Plan of Reorganization. RR. Transfers by Debtors. The revesting, on the Effective Date, of the property of the Debtors' estates: (a) vests the appropriate Reorganized Debtors or their successors or assigns, as the case may be, with good title to such property, free and clear of all Claims and Equity Interests, except as expressly provided in the Plan of Reorganization or this Confirmation Order; and (b) does not constitute a voidable transfer under the Bankruptcy Code or applicable nonbankruptcy law. SS. Retention of Jurisdiction. On and after the Effective Date, the Bankruptcy Court shall retain jurisdiction over all matters, including, but not limited to, those matters set forth in Sections 8 and 13 of the Plan of Reorganization, arising in and under, and related to, the Reorganization Cases for, among other things, the purposes set forth in Sections 8.1 and 13 of the Plan of Reorganization and section 1142 of the Bankruptcy Code, as well as any (i) motions filed prior to the Effective Date requiring authorization to use, sell, or lease assets outside the ordinary course of business pursuant to section 363 of the Bankruptcy Code and (ii) motions to assume, assume and assign, or reject executory contracts or unexpired leases pursuant to Sections 8.1 and 8.5 of the Plan of Reorganization. CONCLUSIONS OF LAW 1. Conclusions of Law. The conclusions of law set forth herein and by the Bankruptcy Court at the conclusion of the Confirmation Hearing constitute the Bankruptcy Court's conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure, as made applicable herein by Bankruptcy Rules 7052 and 9014. To the extent any of the following conclusions of law constitute findings of fact, they are adopted as such. 2. Confirmation. The Plan of Reorganization and each of its provisions shall be, and hereby are, CONFIRMED under section 1129 of the Bankruptcy Code. 3. Solicitation and Notice. Notice of the Confirmation Hearing complied with the terms of the Disclosure Statement Order, was appropriate and satisfactory based upon the circumstances of the Debtors' Reorganization Cases, and was in compliance with the provisions of the Bankruptcy Code, the Bankruptcy Rules and the Local Rules. The solicitation of votes on the Plan of Reorganization complied with the solicitation procedures in the Disclosure Statement Order, was appropriate and satisfactory based upon the circumstances of the Debtors' Reorganization Cases, and was in compliance with the provisions of the Bankruptcy Code, the Bankruptcy Rules and the Local Rules. Notice of the Plan Supplement, and all related documents, was appropriate and satisfactory based upon the circumstances of the Debtors' Reorganization Cases, and was in compliance with the provisions of the Bankruptcy Code, the Bankruptcy Rules and the Local Rules. 4. Objections. All parties have had a full and fair opportunity to litigate all issues raised by the Objections, or which might have been raised, and the Objections have been fully and fairly litigated. All Objections, responses, statements and comments in opposition to the Plan of Reorganization, other than those withdrawn with prejudice in their entirety prior to the Confirmation Hearing or otherwise resolved on the record of the Confirmation Hearing and/or herein, shall be, and hereby are, overruled for the reasons stated on the record. As noted on the record of the Confirmation Hearing, the ERISA Objection is withdrawn as an objection to confirmation of the Plan of Reorganization, and the issues raised therein will be addressed in the claims resolution process with the rights of all parties reserved with respect thereto. 5. Binding Effect. Except as otherwise provided in section 1141(d)(3) of the Bankruptcy Code, upon entry of this Confirmation Order and subject to the occurrence of the Effective Date, the provisions of the Plan of Reorganization and the Plan Supplement shall bind (i) any holder of a Claim against or Equity Interest in the Debtors and their respective successors and assigns, whether or not such Claim or Equity Interest of such holder is impaired under the Plan of Reorganization and whether or not such holder has accepted the Plan of Reorganization, (ii) any and all non-Debtor parties to assumed executory contracts and unexpired leases with any of the Debtors, (iii) the Objectors, (iv) every other party in interest in the Reorganization Cases and (v) all parties receiving property under the Plan of Reorganization and the Plan Supplement documents, and their respective heirs, executors, administrators, successors, or assigns. 6. Vesting of Assets (11 U.S.C. Section 1141(b), (c)). Pursuant to Section 11.1 of the Plan of Reorganization, upon the Effective Date, pursuant to sections 1141(b) and (c) of the Bankruptcy Code, all property of the Debtors shall vest in each of the Reorganized Debtors free and clear of all Claims, Liens, encumbrances, charges and other interests, except as provided in the Plan of Reorganization. Upon the Effective Date, the Reorganized Debtors may operate their businesses and may use, acquire and dispose of property free of any restrictions of the Bankruptcy Code or the Bankruptcy Rules and in all respects as if there were no pending case under any chapter or provision of the Bankruptcy Code, including any and all actions to be taken to effectuate the Restructuring Transactions. 7. Objections to Claims. The Reorganized Debtors shall be entitled to object to all Claims. Any objections to Claims shall be served and filed on or before the later of (i) one hundred twenty (120) days after the Effective Date, as such time may be extended by order of the Bankruptcy Court, and (ii) such later date as may be fixed by the Bankruptcy Court, whether fixed before or after the date specified in clause (i) above. 8. Disputed Claims. If any portion of a Claim is disputed, then no payment or distribution shall be made on account of the portion of such Claim that is disputed unless and until such Disputed Claim becomes an Allowed Claim. On the next Distribution Date after a Disputed Claim becomes an Allowed Claim, the Disbursing Agent shall distribute to the holder of such Claim, the property distributable with respect to such Claim in accordance with Sections 4.4, 4.11, 4.16 and 4.21 of the Plan of Reorganization, as applicable, and any net earnings attributable thereto. To the extent that all or a portion of a Disputed Claim is disallowed, the holder of such Claim shall not receive any distribution on account of the portion of such Claim that is disallowed, and any property withheld pending the resolution of such Claim shall be reallocated in accordance with Sections 4.4, 4.11, 4.16 and 4.21 of the Plan of Reorganization, as applicable, together with any net earnings attributable thereto. 9. Assumption or Rejection of Executory Contracts and Unexpired Leases (11 U.S.C. Section 1123(b)(2)). Pursuant to Section 8.1 of the Plan of Reorganization, as of the Effective Date all executory contracts and unexpired leases that exist between the Debtors and any person or entity shall be deemed rejected by the Debtors, except for any executory contract or unexpired lease (i) that has been assumed pursuant to an order of the Bankruptcy Court entered prior to the Effective Date, (ii) as to which a motion for approval of the assumption of such executory contract or unexpired lease has been filed and served prior to the Confirmation Date, or (iii) that is specifically designated on Schedule 8.1 to the Plan of Reorganization as an executory contract or unexpired lease to be assumed. The parties to such executory contracts or unexpired leases to be assumed or assumed and assigned by the Debtors shall have twenty (20) days from the date of service of the Assumption Notice to file and serve any objection to the assumption by the Debtors of such executory contracts or unexpired leases and/or the proposed cure amounts listed by the Debtors. If there are any objections filed, the Bankruptcy Court shall hold a hearing on a date to be set by the Bankruptcy Court. Notwithstanding Section 8.1 of the Plan of Reorganization, the Debtors shall retain their rights (after giving notice to the Creditors' Committee) to reject any of their executory contracts or unexpired leases that are subject to a dispute concerning amounts necessary to cure any defaults. Notwithstanding any omission from Schedule 8.1 to the Plan of Reorganization, all non-disclosure agreements to which any of the Debtors is a counterparty shall be deemed assumed upon entry of the confirmation order expressly conditioned upon and subject to the occurrence of the Effective Date and the cure costs in connection with each such agreement shall be fixed at $0.00. 10. Bar Date for Filing Proofs of Claim Relating to Executory Contracts and Unexpired Leases Rejected Pursuant to the Plan of Reorganization. In the event that the rejection of an executory contract or unexpired lease by the Debtors pursuant to the Plan of Reorganization results in damages to the other party or parties to such contract or lease, a Claim for such damages, if not heretofore evidenced by a filed proof of claim, shall be forever barred and shall not be enforceable against the Debtors or the Reorganized Debtors, or their properties or interests in property as agents, successors, or assigns, unless a proof of claim is filed with the Bankruptcy Court and served upon the attorneys for the Debtors on or before the date that is thirty (30) days after the later of (i) the date of service of notice of the Confirmation Date, (ii) notice of modification to Schedule 8.1 to the Plan of Reorganization, or (iii) the date of service of notice of such later rejection date that occurs as a result of a dispute concerning amounts necessary to cure any defaults. 11. General Authorization. Each of the officers of New Loral, New Skynet, New SS/L and the other Reorganized Debtors is authorized, in accordance with his or her authority under the resolutions of the applicable Board of Directors, to execute, deliver, file, or record such contracts, instruments, releases, indentures and other agreements or documents and take such actions as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan of Reorganization. 12. Substantive Consolidation. Entry of this Confirmation Order shall constitute the approval, pursuant to section 105(a) of the Bankruptcy Code, effective as of the Effective Date, of the substantive consolidation of the Ltd. Debtors, the Orion Debtors, the SpaceCom Debtors and the SS/L Debtors, respectively, for all purposes related to the Plan of Reorganization, including, without limitation, for purposes of voting, confirmation and distribution, and subject to the terms outlined in Section 5.1 of the Plan of Reorganization. The substantive consolidation effected pursuant to Section 5.1 of the Plan of Reorganization shall not (other than for purposes related to funding distributions under the Plan of Reorganization and as set forth in Section 5.1 of the Plan of Reorganization) affect: (i) the legal and organizational structure of the Debtors; (ii) pre and post-Commencement Date guarantees, Liens and security interests that are required to be maintained (A) in connection with executory contracts or unexpired leases that were entered into during the Reorganization Cases or that have been or will be assumed, or (B) pursuant to the Plan of Reorganization; or (iii) distributions out of any insurance policies or proceeds of such policies. 13. Subordination of Securities Litigation Claims. Subject to paragraph 4 of this Confirmation Order as it applies to the ERISA Objection, Entry of this Confirmation Order shall constitute the approval, pursuant to section 510(b) of the Bankruptcy Code, of the subordination of the Securities Litigation Claims classified in Ltd. Class 7 (Securities Litigation Claims); each holder of an Allowed Securities Litigation Claim shall not receive or retain any interest or property under the Plan of Reorganization on account of such Securities Litigation Claim. 14. Plan Supplement. The documents contained in the Plan Supplement and any amendments, modifications and supplements thereto permitted by the Plan of Reorganization or this Confirmation Order, and all documents and agreements introduced into evidence by the Debtors at the Confirmation Hearing (including all exhibits and attachments thereto and documents referenced therein), are authorized and approved, including, but not limited to the (i) draft New Skynet Notes Indenture, (ii) Form of New Skynet Note, (iii) Registration Rights Agreement (New Loral Common Stock, New Skynet Preferred Stock and New Skynet Notes), (iv) Subscription Forms for Rights Offering, (v) New Loral Certificate of Incorporation, (vi) New Loral Bylaws, (vii) New Skynet Certificate of Incorporation, (viii) Certificate of Designation of New Skynet Preferred Stock, (ix) New Skynet Bylaws, (x) New SS/L Certificate of Incorporation, (xi) New SS/L Bylaws, (xii) Loral SpaceCom Corporation Certificate of Incorporation, (xiii) Loral SpaceCom Corporation Bylaws, (xiv) Loral Space & Communications Holdings Corporation (f/k/a Loral Space & Communications Corporation) Certificate of Incorporation, (xv) Loral Space & Communications Holdings Corporation (f/k/a Loral Space & Communications Corporation) Bylaws, (xvi) Certificate of Amendment to Certificate of Incorporation of (a) Loral Space & Communications Corporation (n/k/a Loral Space & Communications Holdings Corporation), (b) Loral Communications Services, Inc., (c) Loral CyberStar Services, Inc., (d) Loral Skynet Network Services, Inc. and (e) Loral CyberStar International, Inc., (xvii) Backstop Commitment Agreement, (xviii) New Management Stock Plan, (xix) Form of New Loral Employment Contract, (xx) Form of Employment Contract of Bernard L. Schwartz, (xxi) SERP Amendment, (xxii) List of Subsidiaries that Will Be Merged or Dissolved and Assets to Be Transferred, (xxiii) Schedule of Executory Contracts and Unexpired Leases to Be Assumed Pursuant to the Plan (Schedule 8.1 to the Plan) and (xxiv) List of Surviving Debtors Whose Organizational Documents Are Not Being Revised. Subject to the terms of the Plan of Reorganization, without need for further order or authorization of this Court, with the consent of the Creditors' Committee, the Reorganized Debtors are authorized and empowered to make any and all modifications to any and all documents included as part of the Plan Supplement that do not materially modify the terms of such documents and are consistent with the Plan of Reorganization. The Debtors are authorized to enter into the Backstop Commitment Agreement and to pay all fees and expenses thereunder in accordance with the terms thereof. 15. Cancellation of Existing Securities and Agreements. Except (i) as otherwise expressly provided in the Plan of Reorganization, (ii) with respect to executory contracts or unexpired leases that have been assumed by the Debtors, (iii) for purposes of evidencing a right to distributions under the Plan of Reorganization, and/or (iv) with respect to any Claim that is reinstated and rendered unimpaired under the Plan of Reorganization, on the Effective Date, the promissory notes, share certificates for the existing common stock of Loral Ltd., share certificates for the existing preferred stock of Loral Ltd., Ltd. Notes, Orion 10% Notes, Orion Stub Notes, Indentures and other instruments evidencing any Claims or Equity Interests shall be deemed automatically cancelled without further act or action under any applicable agreement, law regulation, order, or rule and the obligations of the Debtors under the agreements, indentures and certificates of designations governing such Claims and Equity Interests, as the case may be, shall be discharged; provided, however, that the Ltd. Notes, Orion 10% Notes, Orion Stub Notes and Indentures shall continue in effect solely for the purposes of (i) allowing the holders of Allowed Note Claims to receive their distributions under the Plan of Reorganization, (ii) allowing the applicable Indenture Trustee to make the distributions to be made on account of the Ltd. Notes, Orion 10% Notes and Orion Stub Notes and (iii) permitting each Indenture Trustee to assert its Charging Lien against such distributions for payment of the Indenture Trustee Fees. 16. Authorization of New Securities. Pursuant to Section 10.4 of the Plan of Reorganization, New Loral and New Skynet, as applicable, are authorized without further act or action under applicable law, regulation, order, or rule, to issue (a) the New Loral Common Stock, (b) the New Skynet Preferred Stock, (c) the New Skynet Notes, (d) the Subscription Rights and (e) the Options. 17. Securities Laws Exemption. To the maximum extent provided by section 1145 of the Bankruptcy Code and applicable nonbankruptcy law, the issuance under the Plan of Reorganization of the New Loral Common Stock, the New Skynet Preferred Stock, the New Skynet Notes and the Subscription Rights shall be, and hereby is exempt from the registration requirements of the Securities Act of 1933, as amended, and all rules and regulations promulgated thereunder, and any State or local law requiring registration for the offer of sale of a security. 18. New Management Stock Plan. Entry of this Confirmation Order constitutes the approval of the New Management Stock Plan, which shall be and shall be deemed to be adopted by New Loral and effective as of the Effective Date. The solicitation of votes on the Plan of Reorganization includes and is deemed to be a solicitation for approval of the New Management Stock Plan by the holders of the New Loral Common Stock. 19. Payment of Statutory Fees. All fees due and payable pursuant to section 1930 of title 28 of the United States Code, as determined by the Bankruptcy Court shall be paid on the Effective Date, and thereafter as may be required. 20. Exemption From Transfer Taxes. Pursuant to section 1146(c) of the Bankruptcy Code, the issuance, transfer, or exchange of notes or equity securities under the Plan of Reorganization, the creation of any mortgage, deed of trust, or other security interest, the making or assignment of any lease or sublease, or the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with the Plan of Reorganization, including, without limitation, any merger agreements or agreements of consolidation, deeds, bills of sale, or assignments executed in connection with any of the transactions contemplated under the Plan of Reorganization, shall not be subject to any stamp, real estate transfer, mortgage recording, or other similar tax. All sale transactions consummated by the Debtors and approved by the Bankruptcy Court on and after the Commencement Date through and including the Effective Date, including, without limitation, the transfers effectuated under the Plan of Reorganization, the Restructuring Transactions, the sale by the Debtors of owned property pursuant to section 363(b) of the Bankruptcy Code, and the assumption, assignment and sale by the Debtors of unexpired leases of non-residential real property pursuant to section 365(a) of the Bankruptcy Code, shall be deemed to have been made under, in furtherance of, or in connection with the Plan of Reorganization and, thus, shall not be subject to any stamp, real estate transfer, mortgage recording, or other similar tax. 21. Date of Distributions. Pursuant to Section 6.4 of the Plan of Reorganization, except as otherwise provided in the Plan of Reorganization, any distributions and deliveries to be made under the Plan of Reorganization shall occur on the Effective Date or as soon thereafter as is practicable. In the event that any payment or act under the Plan of Reorganization is required to be made or performed on a date that is not a Business Day, then the making of such payment or the performance of such act may be completed on or as soon as reasonably practicable after the next succeeding Business Day, but shall be deemed to have been completed as of the required date. 22. Allocation of Distributions. To the extent that any Allowed Claim entitled to a distribution under the Plan of Reorganization consists of indebtedness and accrued but unpaid interest thereon, such distribution shall be allocated first to the principal amount of the Claim (as determined for federal income tax purposes) and then, to the extent the consideration exceeds the principal amount of the Claim, to accrued but unpaid interest. 23. Final Fee Applications. Notwithstanding Section 2.2 of the Plan of Reorganization, any and all entities seeking an award by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Confirmation Date, including any such applications under sections 503(b)(2), 503(b)(3), 503(b)(4), or 503(b)(5) of the Bankruptcy Code, (i) shall file their respective final applications for allowance of compensation for services rendered and reimbursement of expenses incurred by the date that is thirty (30) days after the Effective Date and (ii) shall be paid in full in such amounts as are allowed by this Court (A) five (5) Business Days after the date upon which the order relating to any such Administrative Expense Claim is entered or (B) upon such other terms as may be mutually agreed upon between the holder of such an Administrative Expense Claim and the Debtors, or, if on or after the Effective Date, the Reorganized Debtors. The Debtors and the Reorganized Debtors, as applicable, are authorized to pay compensation for services rendered or reimbursement of expenses incurred after the Confirmation Date and until the Effective Date in the ordinary course of business and without the need for Bankruptcy Court approval. In accordance with Section 2.2 of the Plan of Reorganization, the Debtors will support (and the Creditor's Committee will not object to) applications for the reimbursement of reasonable fees and expenses (x) pursuant to section 503(b) of the Bankruptcy Code of attorneys for MHR Fund Management LLC and its affiliates, Contrarian Capital Trade Claims, LP and Angelo, Gordon & Co., L.P. and (y) for MHR Fund Management LLC and its affiliates, incurred in connection with the preparation and filing, including filing fees, of submissions under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 or fees and expenses associated with other regulatory filings. 24. Discharge of Debtors. Pursuant to Section 11.4 of the Plan of Reorganization, upon the Effective Date and in consideration of the distributions to be made under the Plan of Reorganization, except as otherwise expressly provided in the Plan of Reorganization, each holder (as well as any trustees and agents on behalf of each holder) of a Claim or Equity Interest and any affiliate of such holder shall be deemed to have forever waived, released and discharged the Debtors, to the fullest extent permitted by section 1141 of the Bankruptcy Code, of and from any and all Claims, Equity Interests, rights and liabilities that arose prior to the Effective Date. Upon the Effective Date, all such persons shall be forever precluded and enjoined, pursuant to section 524 of the Bankruptcy Code, from prosecuting or asserting any such discharged Claim against or terminated Equity Interest in the Debtors. 25. Exculpation. Pursuant to Section 11.8 of the Plan of Reorganization, notwithstanding anything contained therein to the contrary, as of the Effective Date, none of (i) the Debtors and the Debtors' officers, directors and employees, (ii) the Creditors' Committee and any subcommittee thereof, (iii) the Equity Committee, (iv) the Agent, (v) the Indenture Trustees, (vi) the JPLs, (vii) the accountants, financial advisors, investment bankers, agents and attorneys for the Debtors, (viii) the Backstop Purchasers and their affiliates and (ix) the directors, officers, partners, members, agents, representatives, accountants, financial advisors, investment bankers, or attorneys for any of the persons or entities described in (ii), (iii), (iv), (v), (vi) and (viii) above (but solely in their capacities as such) shall have or incur any liability for any claim, cause of action, or other assertion of liability for any action taken or omitted to be taken since the Commencement Date in connection with, or arising out of, the Reorganization Cases, the formulation, dissemination, confirmation, consummation, or administration of the Plan of Reorganization, property to be distributed under the Plan of Reorganization, or any other act or omission in connection with the Reorganization Cases, the provisional liquidation of the Bermudian Debtors, the Plan of Reorganization, the Disclosure Statement, or any contract, instrument, document or other agreement related thereto; provided, however, that the foregoing shall not affect the liability of any person that otherwise would result from any such act or omission to the extent such act or omission is determined by a Final Order to have constituted willful misconduct or gross negligence; and provided, further that such exculpation shall not be more broad than section 11.12 of the Plan of Reorganization, as set forth in Paragraph J.(a) of this Confirmation Order. 26. Releases of Representatives. Pursuant to Section 11.9 of the Plan of Reorganization, effective as of the Confirmation Date but subject to the occurrence of the Effective Date, and in consideration of: (a) the services provided by the present and former directors, officers, employees, affiliates, agents, financial advisors, attorneys and representatives of the Debtors to the Debtors who acted in such capacities after the Commencement Date; (b) the services of the Creditors' Committee and the Backstop Purchasers and their affiliates; (c) the services of the Equity Committee; (d) the services of the Agent; (e) the services of each Indenture Trustee; and (f) the services of the JPLs, and their respective professionals in connection with the Reorganization Cases and the provisional liquidations of the Bermudian Debtors, (x) the Debtors and the Reorganized Debtors; (y) each holder of a Claim or Equity Interest that votes to accept the Plan of Reorganization (or is deemed to accept the Plan of Reorganization); and (z) to the fullest extent permissible under applicable law, as such law may be extended or integrated after the Effective Date, each holder of a Claim or Equity Interest that does not vote to accept the Plan of Reorganization, shall release unconditionally and forever each present or former director, officer, employee, agent, financial advisor, attorney and representative (and their respective affiliates) of the Debtors who acted in such capacity after the Commencement Date, the Creditors' Committee, each member of the Creditors' Committee, the Backstop Purchasers, the Equity Committee, each member of the Equity Committee, the Agent, the Indenture Trustees, the JPLs, and each of their respective members, officers, directors, agents, financial advisors, attorneys, employees, equity holders, parent corporations, subsidiaries, partners, affiliates and representatives from any and all claims or causes of action whatsoever in connection with, related to, or arising out of the Reorganization Cases, the pursuit of confirmation of the Plan of Reorganization, the consummation thereof, the administration thereof, or the property to be distributed thereunder, and the provisional liquidation of the Bermudian Debtors; provided, that the foregoing shall not operate as a waiver of or release from any causes of action arising out of the willful misconduct or gross negligence of any such person or entity; and provided, further that such release shall not be more broad than section 11.12 of the Plan of Reorganization, as set forth in Paragraph J.(a) of this Confirmation Order. 27. Injunction. Pursuant to Section 11.5 of the Plan of Reorganization, except as otherwise expressly provided in the Plan of Reorganization, all persons or entities who have held, hold or may hold Claims or Equity Interests and all other parties in interest, along with their respective present and former employees, agents, officers, directors, principals and affiliates, are permanently enjoined, from and after the Effective Date, from (i) commencing or continuing in any manner any action or other proceeding of any kind with respect to any such Claim or Equity Interest against the Debtors or Reorganized Debtors, (ii) the enforcement, attachment, collection or recovery by any manner or means of any judgment, award, decree or order against the Debtors or Reorganized Debtors, (iii) creating, perfecting, or enforcing any encumbrance of any kind against the Debtors or Reorganized Debtors or against the property or interests in property of the Debtors or Reorganized Debtors, or (iv) asserting any right of setoff, subrogation or recoupment of any kind against any obligation due from the Debtors or Reorganized Debtors or against the property or interests in property of the Debtors or Reorganized Debtors, with respect to any such Claim or Equity Interest. The terms of such injunction shall extend to any successors of the Debtors and Reorganized Debtors and their respective properties and interest in properties. 28. Notwithstanding the foregoing, Section 11.5 of the Plan of Reorganization shall not in any way adversely impact the LM Entities' alleged setoff and recoupment rights as set forth in the adversary proceeding styled Space Systems/Loral, Inc. v. International Launch Services, Inc., Lockheed Martin Comm'l Launch Services, Inc. and Lockheed Khrunichev-Energio Int'l, Inc., Adv. Proc. No. 04-2955 (RDD). 29. Injunction Against Interference With the Plan of Reorganization. Pursuant to Section 11.7 of the Plan of Reorganization and subject to all parties' rights under the Bankruptcy Code and Bankruptcy Rules, (a) upon entry of the Confirmation Order, all holders of Claims and Equity Interests and other parties in interest, along with their respective present or former employees, agents, officers, directors, principals and affiliates, shall be enjoined from taking any actions to interfere with the implementation or consummation of the Plan of Reorganization and (b) nothing in the Plan of Reorganization or this Confirmation Order shall affect, release, enjoin, or impact in any way the prosecution of any violations of fiduciary obligations under the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. 1001 et seq., against any Non-Debtor entity, including but not limited to, the claims asserted against the Non-Debtor defendants in the pending action in the United States District Court for the Southern District of New York styled In re Loral Space ERISA Litigation, Master File No. 03-CV-9729 (CTS). 30. Avoidance Actions. Pursuant to Section 11.10 of the Plan of Reorganization, other than any actions covered by releases granted in the Plan of Reorganization, or by this Confirmation Order, from and after the Effective Date, the Reorganized Debtors shall have the right to prosecute any avoidance or equitable subordination or recovery actions under sections 105, 502(d), 510, 542 through 551, and 553 of the Bankruptcy Code that belong to the Debtors or Debtors in Possession. Any rights of the Equity Committee to prosecute claims set forth in the complaint filed in Adversary Proceeding No. 05-02309 (RDD), if any, are subject to the Order Denying Motion of the Official Committee of Equity Security Holders for Leave to Prosecute Claim, entered of even date herewith. 31. Retention of Causes of Action/Reservation of Rights. Pursuant to Section 11.11 of the Plan of Reorganization, nothing contained in the Plan of Reorganization or this Confirmation Order shall be deemed to be a waiver or the relinquishment of any rights or causes of action that the Debtors or the Reorganized Debtors may have or which the Reorganized Debtors may choose to assert on behalf of their respective estates under any provision of the Bankruptcy Code or any applicable nonbankruptcy law, including, without limitation, (i) any and all Claims against any person or entity, to the extent such person or entity asserts a crossclaim, counterclaim, and/or Claim for setoff which seeks affirmative relief against the Debtors, the Reorganized Debtors, their officers, directors, or representatives and (ii) any and all Claims for the turnover of any property of the Debtors' estates. Nothing contained in the Plan of Reorganization or this Confirmation Order shall be deemed to be a waiver or relinquishment of any claim, cause of action, right of setoff, or other legal or equitable defense which the Debtors had immediately prior to the Commencement Date, against or with respect to any Claim left unimpaired by the Plan of Reorganization. The Reorganized Debtors shall have, retain, reserve, and be entitled to assert all such claims, causes of action, rights of setoff, and other legal or equitable defenses which the Debtors had immediately prior to the Commencement Date fully as if the Reorganization Cases had not been commenced, and all of the Reorganized Debtors' legal and equitable rights respecting any Claim left unimpaired by the Plan of Reorganization may be asserted after the Confirmation Date to the same extent as if the Reorganization Cases had not been commenced. 32. Terms of Injunctions or Stays. Pursuant to Section 11.6 of the Plan of Reorganization, unless otherwise provided, all injunctions or stays arising under or entered during the Reorganization Cases under section 105 or 362 of the Bankruptcy Code or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the later of the Effective Date and the date indicated in the order providing for such injunction or stay. 33. Exit Financing. The terms and conditions of the Amended and Restated Letter of Credit Reimbursement Agreement (the "Exit L/C Agreement") between SS/L, as borrower, and JPMorgan Chase Bank, N.A., as issuing lender (the "Issuing Lender"), any security documents and all other documents related thereto (together with the Exit L/C Agreement, the "Exit L/C Loan Documents") are approved and ratified as being entered into in good faith and being critical to the success of the Plan of Reorganization. New SS/L is hereby authorized to execute and deliver the Exit L/C Loan Documents and to perform all of its obligations thereunder. The Exit L/C Loan Documents shall constitute legal, valid, binding and authorized obligations of SS/L, as a Reorganized Debtor, enforceable in accordance with their terms. New SS/L is hereby authorized to pay all fees, costs and expenses in connection with the Exit L/C Loan Documents. On the Effective Date, all of the liens and security interests to be granted in accordance with the Exit L/C Loan Documents shall be deemed approved and shall be legal, valid, binding and enforceable first priority liens on the collateral securing the obligations under the Exit L/C Loan Documents. In furtherance of the foregoing, SS/L, as a Reorganized Debtor, is hereby authorized to make all filings and recordings, and to obtain all governmental approvals and consents necessary to establish and perfect such liens and security interests under the provisions of any applicable federal, state or other law that would be applicable in the absence of this Confirmation Order, and will thereafter cooperate with the Issuing Lender to make all other filings and recordings that otherwise would be reasonably necessary under applicable law to give notice of such liens and security interests to third parties. 34. Notwithstanding anything to the contrary contained in the Plan of Reorganization or in this Confirmation Order, all obligations incurred by SS/L under (i) the Letter of Credit Reimbursement Agreement, dated as of April 2, 2004, between SS/L, as borrower, and JPMorgan Chase Bank, N.A. (the "Postpetition L/C Agreement") and (ii) the Cash Collateral Agreement, dated as of April 2, 2004, between SS/L, as pledgor, and JPMorgan Chase Bank, N.A. (the "Cash Collateral Agreement" and together with the Postpetition L/C Agreement, any security documents and all other documents related thereto, the "Postpetition L/C Loan Documents"), shall not be discharged and all liens and security interests granted in connection therewith shall remain in full force and effect (and SS/L hereby waives any such discharge pursuant to Bankruptcy Code Section 1141(d)(4)). All fees, costs and expenses paid by SS/L in connection with the Postpetition L/C Loan Documents are hereby ratified and approved, and are not subject to any defense, counterclaim, offset, or avoidance. 35. Dissolution of Statutory Committees. Pursuant to Section 14.7 of the Plan of Reorganization, effective thirty (30) days after the Effective Date if no appeal of this Confirmation Order is then pending, the Creditors' Committee and the Equity Committee shall dissolve with respect to the Debtors and their respective members shall be released and discharged from all further authority, duties, responsibilities and obligations relating to the Reorganization Cases, with the exception that the Creditors' Committee and the Equity Committee and their respective professionals shall continue to be authorized to perform their duties with respect to (i) applications filed pursuant to sections 330 and 331 of the Bankruptcy Code, (ii) motions seeking the enforcement of the provisions of the Plan of Reorganization and the transactions contemplated under the Plan of Reorganization or this Confirmation Order and (iii) with respect to any adversary proceeding or appeal commenced on or prior to the Effective Date. 36. Plan Modifications. Subject to Section 14.11(a) of the Plan of Reorganization, after the Confirmation Date, so long as such action does not materially adversely affect the treatment of holders of Claims or Equity Interests under the Plan of Reorganization, the Debtors or the Reorganized Debtors, subject to the consent of the Creditors' Committee, may institute proceedings in the Bankruptcy Court to remedy any defect or omission or reconcile any inconsistencies in the Plan of Reorganization or the Confirmation Order, with respect to such matters as may be necessary to carry out the purposes and effects of the Plan of Reorganization. 37. Other Amendments to the Plan of Reorganization. Prior to the Effective Date, the Debtors, subject to the consent of the Creditors' Committee, may make appropriate technical adjustments and modifications to the Plan of Reorganization without further order or approval of the Bankruptcy Court, provided that such technical adjustments and modifications do not adversely affect in a material way the treatment of holders of Claims or Equity Interests. 38. Notice of Entry of Confirmation Order. On or before the date that is ten (10) days after entry of this Confirmation Order, the Debtors shall serve by first class mail a notice of the entry of this Confirmation Order, in substantially the form annexed hereto as Exhibit C (the "Confirmation Notice"), to each of the following at their respective addresses last known to the Debtors: (i) the Office of the United States Trustee for the Southern District of New York, (ii) the attorneys for the Creditors' Committee, (iii) the attorneys for the Equity Committee, (iv) the attorneys for the Agent, (v) the attorneys for the Backstop Purchaser, (vi) all parties entitled to notice pursuant to this Court's Order, dated July 15, 2003, establishing notice procedures in these chapter 11 cases, (vii) the Securities and Exchange Commission and the District Director of the Internal Revenue Service for the Southern District of New York, (viii) all persons or entities listed in the Debtors' schedules of assets and liabilities, or any amendments thereto, (ix) all counterparties to executory contracts and unexpired leases to be assumed pursuant to the Plan of Reorganization and (x) any other known holders of Claims against or Equity Interests in the Debtors. Such service shall constitute good and sufficient notice pursuant to Bankruptcy Rule 2002(f)(7) and 2002(i)-(l) of the confirmation of the Plan of Reorganization and entry of this Confirmation Order. The Debtors shall also cause the Confirmation Notice to be published as promptly as practicable after the Effective Date once in each of The Wall Street Journal (national and international editions) and The New York Times (national edition). 39. Conditions Precedent to the Effective Date. Pursuant to Section 12.1 of the Plan of Reorganization, the occurrence of the Effective Date of the Plan of Reorganization is subject to the conditions precedent enumerated in Section 12.1 of the Plan of Reorganization. The conditions precedent specified in Section 12.1 of the Plan of Reorganization may be waived in whole or in part by the Debtors and the Creditors' Committee in each of their sole discretion, except with respect to Section 12.1(f) of the Plan of Reorganization, which may be waived only by the Backstop Purchasers, in their sole discretion, but subject to the terms of and as provided in the Backstop Commitment Agreement. Any such waiver may be effected at any time, without notice or leave or order of this Court, and must be in writing. 40. Corporate Action. On the Effective Date, all matters provided for under the Plan of Reorganization that would otherwise require approval of the stockholders or directors of one or more of the Debtors or Reorganized Debtors, including, without limitation, the authorization to issue or cause to be issued the New Loral Common Stock, the New Skynet Preferred Stock, the New Skynet Notes, or the Subscription Rights, the issuance of the New Loral Common Stock, the New Skynet Preferred Stock, the New Skynet Notes and the Subscription Rights, the New Management Stock Plan, the effectiveness of the New Loral Certificate of Incorporation and the New Loral Bylaws, the effectiveness of the New Skynet Certificate of Incorporation and the New Skynet Bylaws, the effectiveness of the New SS/L Certificate of Incorporation and the New SS/L Bylaws, the effectiveness of the Reorganized Subsidiary Debtors' Certificates of Incorporation and Reorganized Subsidiary Debtors' Bylaws, all Restructuring Transactions to be effectuated pursuant to the Plan of Reorganization, the election or appointment, as the case may be, of directors and officers of the Reorganized Debtors, including New Loral, pursuant to the Plan of Reorganization and the authorization and approval of the New Loral Employment Contracts, and the qualification, of each of New Loral, New Skynet and New SS/L as a foreign corporation wherever the conduct of business by such entities requires such qualification shall be deemed to have occurred and shall be in effect from and after the Effective Date pursuant to the applicable general corporation law of the states in which the Debtors or the Reorganized Debtors are incorporated, without any requirement of further action by the stockholders or directors of the Debtors or the Reorganized Debtors; provided, however, that in accordance with Section 10.2(a) of the Plan of Reorganization, the election or appointment, as the case may be, of each of Messrs. Mark H. Rachesky, Hal Goldstein and Sai S. Devabhaktuni (or any other director of the applicable Reorganized Debtors who is, immediately prior to the Effective Date, employed by or otherwise associated with MHR Fund Management LLC) as directors of the applicable Reorganized Debtors shall be deemed to have occurred and shall be in effect only from and after the date that is two (2) Business Days after the Effective Date. On the Effective Date, or as soon thereafter as is practicable, the Reorganized Debtors, including New Loral, shall, if required, file their amended certificates of incorporation with the Secretary of State of the state in which each such entity is (or will be) organized, in accordance with the applicable general business law of each such jurisdiction. Additionally, it is hereby ordered that (a) the directors of New Loral who were disclosed to the Bankruptcy Court pursuant to Section 10.2 of the Plan of Reorganization shall be deemed to have been elected by the action of the stockholders of New Loral at an annual meeting of the stockholders for the election of directors which shall be deemed to have validly occurred on the Effective Date, effective, with respect to the election of the directors specified in the proviso to the first sentence of this paragraph 40, two (2) Business Days thereafter and (b) in accordance with Section 10.2(a) of the Plan of Reorganization, the next annual meeting of the stockholders of New Loral shall take place not earlier than twelve (12) months after the Effective Date. 41. No Further Action. All actions authorized to be taken pursuant to the Plan of Reorganization, including, without limitation, the Restructuring Transactions set forth in Section 5.2 of the Plan of Reorganization, shall be effective on or as of the Effective Date pursuant to this Confirmation Order, without further application to, or order of this Court, or further action by the respective officers, directors, members, or stockholders of New Loral, New Skynet, New SS/L, or the other Reorganized Debtors, and with the effect that such actions had been taken by unanimous action of such officers, directors, members, or stockholders. 42. GlobalTel. On June 17, 2004, the United States Bankruptcy Court for the District of Delaware with jurisdiction over the chapter 11 cases of Globalstar, L.P. (the "Globalstar Bankruptcy Court") entered that certain Order Confirming the Debtors' First Modified Fourth Amended Joint Plan Under Chapter 11 of the Bankruptcy Code (the "Globalstar Confirmation Order"). On June 29, 2004, the Globalstar Bankruptcy Court entered that certain Notice of (A) Entry of Order Confirming the Debtors' First Modified Fourth Amended Joint Plan Under Chapter 11 of the Bankruptcy Code, (B) Occurrence of the Effective Date, (C) Deadline to File Proof of Certain Rejection Damage Claims and (D) Deadline to File Proof of Certain Administrative Claims (the "Globalstar Effective Date Notice"). Pursuant to the Globalstar Confirmation Order and the Globalstar Effective Date Notice, Ltd. is the owner by legal succession from Globalstar, L.P. of a 49% equity interest in Russian Closed Joint Stock Company "Globalstar-Space Telecommunications" ("CJSC GlobalTel"). Pursuant to the Plan of Reorganization, without further motion to or order of the Bankruptcy Court, (i) Ltd. will be liquidated under the laws of Bermuda, and (ii) on the Effective Date of the Plan of Reorganization, title to the equity interests in CJSC GlobalTel held by Ltd. shall irrevocably pass to New Loral or its affiliate designee (which shall be designated by New Loral no later than ten (10) days prior to the Effective Date of the Plan of Reorganization) such that New Loral or such affiliate designee shall be Ltd.'s legal successor with respect to Ltd.'s interest in the equity interest in CJSC GlobalTel. On or promptly after the Effective Date of the Plan of Reorganization, Ltd. shall execute and provide to New Loral any documents reasonably requested by New Loral to evidence such legal succession. 43. Effect of Failure of Conditions to Effective Date. Pursuant to Section 12.2 of the Plan of Reorganization, in the event the conditions precedent specified in Section 12.1 of the Plan of Reorganization have not been satisfied or waived by 120 days after the Confirmation Date, or, if such conditions would have been satisfied by such date but were not so satisfied as a result of the condition in Section 12.1(g) of the Plan of Reorganization not being so satisfied, then, such 120 day period shall be 180 days after the Confirmation Date, then (i) this Confirmation Order shall be vacated, (ii) no distributions under the Plan of Reorganization shall be made, (iii) the Debtors and all holders of Claims and Equity Interests shall be restored to the status quo ante as of the day immediately preceding the Confirmation Date as though the Confirmation Date never occurred and (iv) all of the Debtors' obligations with respect to the Claims and Equity Interests shall remain unchanged and nothing contained herein shall be deemed to constitute a waiver or release of any claims by or against the Debtors or any other entity or to prejudice in any manner the rights of the Debtors, the Backstop Purchasers, the Creditors' Committee, or any other entity in any further proceedings involving the Debtors. 44. Revocation or Withdrawal of the Plan of Reorganization. The Debtors reserve the right to revoke or withdraw the Plan of Reorganization prior to the Effective Date. If the Debtors take such action, the Plan of Reorganization shall be deemed null and void. In such event, nothing contained in the Plan of Reorganization shall constitute or be deemed a waiver or release of any Claims by or against the Debtors or any other person or to prejudice in any manner the rights of the Debtors or any person in any further proceedings involving the Debtors. 45. Governing Law. Except to the extent that the Bankruptcy Code or other federal law is applicable, or to the extent an exhibit to the Plan of Reorganization or a schedule or document in the Plan Supplement provides otherwise, the rights, duties and obligations arising under the Plan of Reorganization shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to the principles of conflict of laws thereof. 46. Severability. Each term and provision of the Plan of Reorganization, as it may have been altered or interpreted by this Court, is valid and enforceable pursuant to its terms. 47. Conflicts Between Confirmation Order and Plan of Reorganization. The failure to specifically include any particular provision of the Plan of Reorganization in this Confirmation Order will not diminish the effectiveness of such provision, it being the intent of this Court that the Plan of Reorganization is confirmed in its entirety and it and the Plan Supplement are incorporated herein by this reference. To the extent of any inconsistency between the provisions of the Plan of Reorganization and this Confirmation Order, the terms and conditions contained in this Confirmation Order shall govern. The provisions of this Confirmation Order are integrated with each other and are nonseverable and mutually dependent unless expressly stated by further order of this Court. 48. Reference. The failure specifically to include or reference any particular provision of the Plan of Reorganization or any related agreement in this Confirmation Order shall not diminish or impair the efficacy of such provision or such related agreements, it being understood that it is the intent of this Court that the Plan of Reorganization be confirmed and such related agreements be approved in their entirety. 49. Retention of Jurisdiction. This Court may properly, and upon the Effective Date shall, to the extent authorized by law, retain jurisdiction over the matters arising in and under, and related to, the Reorganization Cases, as set forth in Article 13 of the Plan of Reorganization and section 1142 of the Bankruptcy Code. Dated: August 1, 2005 New York, New York /s/ ROBERT D. DRAIN ----------------------------------- HONORABLE ROBERT D. DRAIN UNITED STATES BANKRUPTCY JUDGE EX-99.1 4 y11548exv99w1.txt COMPANY'S MONTHLY OPERATING REPORT EXHIBIT 99.1 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: Chapter 11 Case No. LORAL SPACE & COMMUNICATIONS LTD., ET AL., 03-41709 (RDD) to 03-41728 (RDD) Debtors. (Jointly Administered) MONTHLY OPERATING STATEMENTS FOR THE PERIOD FROM APRIL 22, 2005 TO MAY 20, 2005 DEBTORS' ADDRESS: LORAL SPACE & COMMUNICATIONS LTD. c/o LORAL SPACECOM CORPORATION 600 THIRD AVENUE NEW YORK, NY 10016 MONTHLY DISBURSEMENTS MADE BY LORAL SPACE & COMMUNICATIONS LTD. (IN PROVISIONAL LIQUIDATION IN THE SUPREME COURT OF BERMUDA) AND ITS DEBTOR SUBSIDIARIES (IN MILLIONS): $ 45 ---- DEBTORS' ATTORNEYS: WEIL, GOTSHAL & MANGES LLP 767 FIFTH AVENUE NEW YORK, NY 10153 CONSOLIDATED MONTHLY OPERATING LOSS (IN MILLIONS): $ 8 ---- REPORT PREPARER: LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN POSSESSION (IN PROVISIONAL LIQUIDATION IN THE SUPREME COURT OF BERMUDA)
THIS OPERATING STATEMENT MUST BE SIGNED BY A REPRESENTATIVE OF THE DEBTOR The undersigned, having reviewed the attached report and being familiar with the Debtors' financial affairs, verifies under penalty of perjury, that the information contained therein is complete, accurate and truthful to the best of my knowledge. /s/ Richard J. Townsend ----------------------------- Richard J. Townsend Executive Vice President and Chief Financial Officer Indicate if this is an amended statement by checking here: AMENDED STATEMENT ---- LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN POSSESSION CONDENSED CONSOLIDATED BALANCE SHEET MAY 20, 2005 (IN MILLIONS) (UNAUDITED) ASSETS Current assets: Cash and cash equivalents ................................................. $ 168 Accounts receivable, net .................................................. 15 Contracts-in-process ...................................................... 33 Inventories ............................................................... 40 Other current assets ...................................................... 18 ------- Total current assets .................................................. 274 Property, plant and equipment, net .......................................... 665 Long-term receivables ....................................................... 82 Investments in and advances to affiliates ................................... 55 Deposits .................................................................... 10 Other assets ................................................................ 55 ------- Total assets .......................................................... $ 1,141 ======= LIABILITIES AND SHAREHOLDERS' DEFICIT Liabilities not subject to compromise: Current liabilities: Accounts payable ........................................................ $ 36 Accrued employment costs ................................................ 31 Customer advances and billings in excess of costs and profits ......... 120 Deferred gain on sale of assets ......................................... 10 Income taxes payable .................................................... 1 Other current liabilities ............................................... 19 ------- Total current liabilities ............................................. 217 Pension liabilities ....................................................... 1 Long-term liabilities ..................................................... 82 ------- Total liabilities not subject to compromise ........................... 300 Liabilities subject to compromise (Note 4) .................................. 1,924 Minority interest ........................................................... 2 Shareholders' deficit: Common stock .............................................................. 4 Paid-in capital ........................................................... 3,393 Treasury stock ............................................................ (3) Retained deficit .......................................................... (4,389) Accumulated other comprehensive loss ...................................... (90) ------- Total shareholders' deficit ........................................... (1,085) ------- Total liabilities and shareholders' deficit ........................... $ 1,141 =======
2 LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN POSSESSION CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE PERIOD FROM APRIL 22, 2005 TO MAY 20, 2005 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Revenues from satellite services .................................. $ 12 Revenues from satellite manufacturing ............................. 22 ---- Total revenues .................................................. 34 Cost of satellite services ........................................ 10 Cost of satellite manufacturing ................................... 20 Selling, general and administrative expenses ...................... 9 ---- Loss from continuing operations before reorganization expenses due to Bankruptcy ...................................... (5) Reorganization income (expense) due to bankruptcy ................. (3) ---- Operating loss from continuing operations ......................... (8) Interest and investment income .................................... ---- Loss from continuing operations before income taxes, equity income in affiliates and minority interest ............... (8) Income tax provision .............................................. -- ---- Loss from continuing operations before equity income in affiliates and minority interest ............................ (8) Equity losses in affiliates ....................................... -- Minority interest ................................................. -- ---- Loss from continuing operations ................................... (8) Loss from discontinued operations ................................. -- ---- Net loss .......................................................... $ (8) ==== Basic and diluted (loss) income per share: Continuing operations ........................................... $(0.17) Discontinued operations ........................................... -- ---- Loss per share .................................................. $(0.17) ==== Weighted average shares outstanding - basic and diluted ........... 44 ====
3 LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN POSSESSION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD FROM APRIL 22, 2005 TO MAY 20, 2005 (IN MILLIONS) (UNAUDITED) Operating activities: Net loss ...................................................... $ (8) Non-cash items: Loss from discontinued operations ........................... -- Equity losses in affiliates ................................. -- Depreciation and amortization ............................... 7 Deferred taxes .............................................. -- Changes in operating assets and liabilities: Accounts receivable ......................................... (1) Contracts-in-process ........................................ 22 Inventories ................................................. (3) Long-term receivables ....................................... -- Other current assets and other assets ....................... (10) Accounts payable ............................................ (11) Accrued expenses and other current liabilities .............. 3 Deferred gain on sale of assets ............................. -- Customer advances ........................................... (18) Income taxes payable ........................................ -- Pension and other postretirement liabilities ................ 2 Long-term liabilities ....................................... -- ----- Net cash provided by operating activities ....................... (17) ----- Net cash provided by discontinued operations .................... -- ----- Investing activities: Capital expenditures for continuing operations ................ -- Investments in and advances to affiliates ..................... -- Insurance proceeds received ................................... 100 ----- Net cash used in investing activities ........................... 100 ----- Net cash used in financing activities ........................... -- ----- Net increase in cash and cash equivalents ....................... 83 Cash and cash equivalents -- beginning of period ................ 85 ----- Cash and cash equivalents -- end of period ...................... $ 168 ===== Supplemental Cash Flow Information: Cash (paid) received for reorganization items: Professional fees ........................................... $ 1 Retention costs ............................................. -- Severance costs ............................................. -- Interest income ............................................. -- ----- $ 1 =====
4 LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN POSSESSION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND PRINCIPAL BUSINESS Loral Space & Communications Ltd. ("Loral," the "Company," "we," "our" and "us", terms that include our subsidiaries unless otherwise indicated or the context requires), together with its subsidiaries is a leading satellite communications company with substantial activities in satellite-based communications services and satellite manufacturing. Loral is organized into two operating segments: Satellite Services, managed by our Loral Skynet division, generates its revenues and cash flows from providing satellite capacity and networking infrastructure to customers for video and direct to home ("DTH") broadcasting, high-speed data distribution, Internet access, communications and networking services. Satellite Manufacturing, conducted by our subsidiary, Space Systems/Loral, Inc. ("SS/L"), generates its revenues and cash flows from designing and manufacturing satellites, space systems and space system components for commercial and government applications including fixed satellite services, DTH broadcasting, broadband data distribution, wireless telephony, digital radio, military communications, weather monitoring and air traffic management. 2. BANKRUPTCY FILINGS AND REORGANIZATION Bankruptcy Filings On July 15, 2003, Loral and certain of its subsidiaries (the "Debtor Subsidiaries" and collectively with Loral, the "Debtors"), including Loral Space & Communications Corporation, Loral SpaceCom Corporation ("Loral SpaceCom"), Loral Satellite, Inc. ("Loral Satellite"), SS/L and Loral Orion, Inc. ("Loral Orion"), filed voluntary petitions for reorganization under chapter 11 of title 11 ("Chapter 11") of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") (Lead Case No. 03-41710 (RDD), Case Nos. 03-41709 (RDD) through 03-41728 (RDD)) (the "Chapter 11 Cases"). We and our Debtor Subsidiaries continue to manage our properties and operate our businesses as "debtors in possession" under the jurisdiction of the Bankruptcy Court and in accordance with the provisions of the Bankruptcy Code (see Basis of Presentation Note 3). Also on July 15, 2003, Loral and one of its Bermuda subsidiaries (the "Bermuda Group") filed parallel insolvency proceedings in the Supreme Court of Bermuda (the "Bermuda Court"). On that date, the Bermuda Court entered an order appointing Philip Wallace, Chris Laverty and Michael Morrison, partners of KPMG, as Joint Provisional Liquidators ("JPLs") in respect of the Bermuda Group. The Bermuda Court granted the JPLs the power to oversee the continuation and reorganization of the Bermuda Group's businesses under the control of their respective boards of directors and under the supervision of the Bankruptcy Court and the Bermuda Court. The JPLs have not audited the contents of this report. As a result of our voluntary petitions for reorganization, all of our prepetition debt obligations were accelerated (see below). On July 15, 2003, we also suspended interest payments on all of our prepetition unsecured debt obligations. A creditors' committee (the "Creditors' Committee") was appointed in the Chapter 11 Cases to represent all unsecured creditors, including all debt holders and, in accordance with the provisions of the Bankruptcy Code, has the right to be heard on all matters that come before the Bankruptcy Court. For the duration of the Chapter 11 Cases, our businesses are subject to the risks and uncertainties of bankruptcy. For example, the Chapter 11 Cases could adversely affect our relationships with customers, suppliers and employees, which in turn could adversely affect the going concern value of our businesses and of our assets, particularly if the Chapter 11 Cases are protracted. Also, transactions outside the ordinary course of business are subject to the prior approval of the Bankruptcy Court, which may limit our ability to respond to certain market events or take advantage of certain market opportunities, and, as a result, our operations could be materially adversely affected. Because we are in Chapter 11, the pursuit of claims and litigation pending against us that arose prior to or relate to events that occurred prior to our bankruptcy filings is generally subject to an automatic stay under Section 362 of the Bankruptcy Code. Accordingly, absent further order of the Bankruptcy Court, parties are generally prohibited from taking any action to recover any prepetition claims or enforce any lien against or obtain possession of any of our property. In addition, pursuant to Section 365 of the Bankruptcy Code, we may reject or assume prepetition executory contracts and unexpired leases. Parties affected by our rejections of contracts or leases may file claims with the Bankruptcy Court. 5 Reorganization After a hearing on June 1, 2005, the Bankruptcy Court ruled that, subject to our making certain clarifications, Loral's Disclosure Statement contained adequate information for the purpose of soliciting creditor approval of Loral's Plan of Reorganization. On June 3, 2005, we filed with the Bankruptcy Court a revised disclosure statement (the "Disclosure Statement") reflecting the requested clarifications, as well as a revised plan of reorganization (the "Plan of Reorganization"), and the Bankruptcy Court entered an order approving the Disclosure Statement and procedures for voting on the Plan of Reorganization. The Plan of Reorganization and Disclosure Statement reflect an agreement among us, the Creditors' Committee and the Ad-Hoc Committee of SS/L trade creditors on the elements of a consensual plan of reorganization. The Disclosure Statement establishes the enterprise value of reorganized Loral at between approximately $708 million and approximately $939 million. The Plan of Reorganization provides, among other things, that: - Our two businesses, Satellite Manufacturing ("New SS/L") and Satellite Services ("New Skynet"), will emerge intact as separate subsidiaries of reorganized Loral ("New Loral"). - New SS/L will emerge debt-free. - New Loral will emerge as a public company under current management and will seek listing on a major stock exchange. - Holders of allowed claims against SS/L and Loral SpaceCom will be paid in cash in full, including interest from the petition date to the effective date of the Plan of Reorganization. - Loral Orion unsecured creditors will receive approximately 77 percent of New Loral common stock and their pro rata share of $200 million of preferred stock to be issued by New Skynet. These creditors also will be offered the right to subscribe to purchase their pro-rata share of $120 million in new senior secured notes of New Skynet, which rights offering will be underwritten by certain Loral Orion creditors who will receive a $6 million fee which may be payable in additional New Skynet notes. - Loral bondholders and certain other unsecured creditors will receive approximately 23 percent of the common stock of New Loral. - Existing common and preferred stock will be cancelled and no distribution will be made to the holders of such stock. On December 17, 2004, the United States District Court for the Southern District of New York reversed the Bankruptcy Court's decision denying the motion of the Ad Hoc Loral Stockholders Protective Committee for the appointment of an examiner under section 1104(c) of the Bankruptcy Code and remanded the matter to the Bankruptcy Court to appoint a qualified independent examiner. On December 20, 2004, the Bankruptcy Court ordered that the United States Trustee appoint an examiner to determine whether the Debtors, including their professionals, have used customary and appropriate processes and procedures to value their assets and businesses or, on the contrary, have employed improper processes and procedures in order to arrive at a materially reduced valuation of their assets and businesses. The Bankruptcy Court further ordered that the examiner shall complete his or her investigation within 30 days of appointment and shall file his or her final report within 60 days of appointment. The Bankruptcy Court established a budget of $200,000 for the examiner to be paid by the Debtors' estates. On March 14, 2005, the examiner filed his report with the Bankruptcy Court, in which he stated, among other things, his conclusion that the value range of Loral could reasonably exceed the value range set forth in our December 2004 disclosure statement, leading, in the examiner's view, to potential alternative low, midpoint and high enterprise valuations for Loral of $931 million, $1,097 million and $1,263 million, respectively. On March 29, 2005, the United States Trustee for the Southern District of New York appointed an official committee of equity security holders (the "Equity Committee") (as amended on April 7, 2005 and April 11, 2005). Implementation of the Plan of Reorganization and the treatment of claims and equity interests as provided therein are subject to confirmation of such Plan of Reorganization by the Bankruptcy Court. The Disclosure Statement and ballots have been mailed to creditors, and the voting deadline is set to expire on July 8, 2005. The Bankruptcy Court hearing to consider confirmation of the Plan of Reorganization has been scheduled for July 13, 2005. We cannot predict with certainty when or if confirmation of the Plan of Reorganization will occur. There can be no assurance that we will be able to obtain court approval of the Plan of Reorganization. Although our cash is mostly unrestricted, it resides in different Debtor Subsidiaries and we are not able to move cash freely between or among certain of our Debtor Subsidiaries without Bankruptcy Court approval. Accordingly, one or more of our Debtor Subsidiaries may not have sufficient cash to operate while another Debtor Subsidiary may have surplus cash. SS/L has received a significant portion of the insurance proceeds from the Telstar 14/Estrela do Sul-1 failure (see below), and, accordingly, is not in need of additional cash to operate. 6 Certain contracts that SS/L has entered into recently provide that SS/L's customer may defer milestone payments otherwise due until after SS/L emerges from bankruptcy. Accordingly, SS/L expects to incur, through July 31, 2005, costs of approximately $59 million in performance on these contracts without corresponding payments and expects to have vendor termination liability exposure of approximately $12 million. If SS/L has not emerged from bankruptcy by July 31, 2005, SS/L will incur additional costs in performing on these contracts, which will further increase its cash needs during the pendency of the Chapter 11 Cases. In January 2004, the North solar array of the Telstar 14/Estrela do Sul-1 satellite ("EDS") only partially deployed after launch, diminishing the power and life expectancy of the satellite. SS/L has submitted to its insurers a claim for a total constructive loss of the satellite, seeking recovery for the insured value of $250 million. SS/L has reached a settlement agreement with a number of the insurers with respect to this pending insurance claim. Under this settlement, which was approved by the Bankruptcy Court on May 10, 2005, SS/L will receive 82% of each settling insurer's respective proportion of the insured amount which would result in $205 million in total proceeds to be received if all insurers agree to the settlement. In addition, under the settlement, the settling insurers waive any rights they may have to obtain title to EDS as a result of payment on the insurance claim. As of the date hereof, SS/L has received $129.4 million of insurance proceeds pursuant to settlements under the terms approved by the Bankruptcy Court. As of the date hereof, SS/L expects to receive an additional $4.7 million from an insurer that has agreed to the settlement and an additional $8.2 million subject to finalizing documentation with an insurer that has agreed in principle to the settlement. As to the remaining insurers, SS/L continues to negotiate with them to reach a settlement under the terms approved by the Bankruptcy Court. There can be no assurance that SS/L will be able to obtain settlements with respect to the non-settling insurers. In the event that SS/L is unable to settle with the remaining insurers in accordance with the terms approved by the Bankruptcy Court, SS/L may need to commence appropriate action(s) against such insurers to enforce its rights. There can be no assurance that SS/L will prevail in such action(s). If SS/L negotiates a lower settlement with the remaining insurers without commencing such action(s) (which will also require Bankruptcy Court approval), SS/L may be required to refund certain amounts to those insurers that have previously settled so that no settling insurer is paying a greater percentage of its respective portion of the insured amount than any other settling insurer. 3. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements (the "financial statements") have been prepared assuming Loral, in its current structure, will continue as a going concern. However, the factors mentioned in Note 2 above, among other things, raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our ability to continue as a going concern is dependent on a number of factors including, but not limited to, the Bankruptcy Court's confirmation of a plan of reorganization, and maintaining good relations with our customers, suppliers and employees. If a plan of reorganization is not confirmed and implemented, we may be forced to liquidate under applicable provisions of the Bankruptcy Code. We cannot give any assurance of the level of recovery our creditors would receive in a liquidation. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities if we were forced to liquidate (see Reorganization in Note 2). The financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") and, in the our opinion, include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of results of operations, financial position and cash flows as of and for the periods presented. All intercompany transactions have been eliminated. The results of operations for the period from April 22, 2005 to May 20, 2005 are not necessarily indicative of the results to be expected for the full year. The financial statements have been prepared in accordance with Statement of Position No. 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code ("SOP 90-7"). SOP 90-7 requires us to distinguish prepetition liabilities subject to compromise from postpetition liabilities in our condensed consolidated balance sheet. The caption "liabilities subject to compromise" reflects the carrying value of prepetition claims that will be restructured in our Chapter 11 Cases. In addition, our condensed consolidated statement of operations portray the results of operations of the reporting entity during Chapter 11 proceedings. As a result, any revenue, expenses, realized gains and losses, and provision for losses resulting directly from the reorganization and restructuring of the Company are reported separately as reorganization items, except those required to be reported as discontinued operations and extraordinary items in conformity with Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long- Lived Assets ("SFAS 144") and SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS 145"). We did not prepare combined financial statements for Loral and its Debtor Subsidiaries, since the subsidiaries that did not file voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code were immaterial to our consolidated financial position and results of operations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the audited consolidated 7 financial statements and notes thereto of Loral included in Loral's latest Annual Report on Form 10-K and the other periodic reports filed by Loral with the Securities and Exchange Commission. Use of Estimates in Preparation of Financial Statements The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses reported for the period. Actual results could differ from estimates. A significant portion of our satellite manufacturing revenue is associated with long-term contracts which require significant estimates. These estimates include forecasts of costs and schedules, estimating contract revenue related to contract performance (including orbital incentives) and the potential for component obsolescence in connection with long-term procurements. Significant estimates also include the estimated useful lives of our satellites. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less. Concentration of Credit Risk Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, foreign exchange contracts, contracts-in-process, long-term receivables and advances and loans to affiliates. Our cash and cash equivalents are maintained with high-credit-quality financial institutions. Historically, our customers have been primarily large multinational corporations and U.S. and foreign governments for which the creditworthiness was generally substantial. In recent years, we have added commercial customers which include companies in emerging markets or the development stage, some of which are highly leveraged or partially funded. Management believes that its credit evaluation, approval and monitoring processes combined with negotiated billing arrangements mitigate potential credit risks with regard to our current customer base. Inventories Inventories consist principally of parts and subassemblies used in the manufacture of satellites which have not been specifically identified to contracts-in-process, and are valued at the lower of cost or market. Cost is determined using the first-in-first-out (FIFO) or average cost method. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is provided on the straight-line method for satellites and related equipment over the estimated useful lives of the related assets. Depreciation is provided primarily on an accelerated method for other owned assets over the estimated useful life of the related assets. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the improvements. Costs incurred in connection with the construction and successful deployment of our satellites and related equipment are capitalized. Such costs include direct contract costs, allocated indirect costs, launch costs, launch and in-orbit test insurance and construction period interest. All capitalized satellite costs are amortized over the estimated useful life of the related satellite. The estimated useful life of the satellites (ranging from seven to 16 years) was determined by engineering analyses performed at the satellite's in-service date. Satellite lives are reevaluated periodically. Losses from unsuccessful launches and in-orbit failures of our satellites, net of insurance proceeds (so long as such amounts are determinable and receipt is probable), are recorded in the period a loss occurs. On March 17, 2004 we sold our North American satellites and related assets. During September 2004, our Telstar 18 satellite began commercial service and we recognized $87 million of sales and $80 million of cost of sales relating to the sales-type lease element of our agreement with APT. In addition, as of May 20, 2005, we have recorded $11 million of deferred revenue relating to the operating lease and service elements of the agreement (primarily APT's lease of four transponders for four years and four additional transponders for five years and our providing APT with telemetry tracking and control services for the life of the satellite), which will be recognized on a straight-line basis over the life of the related element to be provided. Also, as of May 20, 2005, we have recorded a long-term liability of $23 million, representing the present value of our obligation to make future payments of $18.1 million to APT on each of the fourth and fifth service anniversaries of Telstar 18, whereupon APT's leasehold interest in the related transponders described in the preceding sentence, would be terminated. 8 Valuation of Satellites, Long-Lived Assets and Investments in and Advances to Affiliates The carrying value of our satellites, long-lived assets and investments in and advances to affiliates is reviewed for impairment in accordance with SFAS 144 and Accounting Principles Board ("APB") Opinion No. 18, Equity Method of Accounting for Investments in Common Stock, respectively. We periodically evaluate potential impairment loss relating to our satellites and other long-lived assets, when a change in circumstances occurs, by assessing whether the carrying amount of these assets can be recovered over their remaining lives through future undiscounted expected cash flows generated by those assets (excluding financing costs). If the expected undiscounted future cash flows were less than the carrying value of the long-lived asset, an impairment charge would be recorded. Changes in estimates of future cash flows could result in a write-down of the asset in a future period. Estimated future cash flows could be impacted by, among other things: - Changes in estimates of the useful life of the satellite - Changes in estimates of our ability to operate the satellite at expected levels - Changes in the manner in which the satellite is to be used - The loss of one or several significant customer contracts on the satellite If an impairment loss was indicated for a satellite, such amount would be recognized in the period of occurrence, net of any insurance proceeds to be received so long as such amounts are determinable and receipt is probable. If no impairment loss was indicated in accordance with SFAS 144, and we received insurance proceeds, the proceeds would be recognized in our consolidated statement of operations. In the event that the insurance proceeds received exceeded the carrying value of the satellite, the excess of the proceeds over the carrying value of the satellite would be recognized in our consolidated statement of operations. Deposits Deposits primarily represent prepaid amounts on satellite launch vehicles which are expected to be utilized for the launch of customer or Company-owned satellites. Revenue Recognition Revenue from satellite sales under long-term fixed-price contracts is recognized following the provisions of Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts, using the cost-to-cost percentage-of-completion method. Revenue includes the basic contract price and estimated amounts for penalties and incentive payments, including award fees, performance incentives, and estimated orbital incentives discounted to their present value at launch date. Costs include the development effort required for the production of high-technology satellites, non-recurring engineering and design efforts in early periods of contract performance, as well as the cost of qualification testing requirements. Contracts are typically subject to termination for convenience or for default. If a contract is terminated for convenience by a customer or due to a customer's default, the Company is generally entitled to its costs incurred plus a reasonable profit. Revenue under cost-reimbursable type contracts is recognized as costs are incurred; incentive fees are estimated and recognized over the contract term. U.S. government contract risks include dependence on future appropriations and administrative allotment of funds and changes in government policies. Costs incurred under U.S. government contracts are subject to audit. Management believes the results of such audits will not have a material effect on Loral's financial position or its results of operations. Losses on contracts are recognized when determined. Revisions in profit estimates are reflected in the period in which the conditions that require the revision become known and are estimable. In accordance with industry practice, contracts-in-process include unbilled amounts relating to contracts and programs with long production cycles, a portion of which may not be billable within one year. We provide satellite capacity and network services under lease agreements that generally provide for the use of satellite transponders and, in certain cases, earth stations and other terrestrial communications equipment for periods generally ranging from one year to the end of life of the satellite. Some of these agreements have certain obligations, including providing spare or substitute capacity, if available, in the event of satellite failure. If no spare or substitute capacity is available, the agreement may be terminated. Revenue under transponder lease and network services agreements is recognized as services are performed, provided that a contract exists, the price is fixed or determinable and collectibility is reasonably assured. Revenues under contracts that include fixed lease payment increases are recognized on a straight-line basis over the life of the lease. 9 Lease contracts qualifying for capital lease treatment are accounted for as sales-type leases. Other terrestrial communications equipment represents network elements (antennas, transmission equipment, etc.) necessary to enable communication between multiple terrestrial locations through a customer-selected satellite communications service provider. Revenue from equipment sales is primarily recognized upon acceptance by the customer, provided that a contract exists, the price is fixed or determinable and collectibility is reasonably assured. Revenue from equipment sales under long-term fixed price contracts is recognized using the cost-to-cost percentage-of-completion method. Losses on contracts are recognized when determined and revisions in profit estimates are reflected in the period in which the conditions that require the revision become known and are estimable. Revenues under arrangements that include both services and equipment elements are allocated based on the relative fair values of the elements of the arrangement; otherwise, revenue is recognized as services are provided over the life of the arrangement. Foreign Exchange Contracts Prior to filing Chapter 11, we entered into foreign exchange contracts as hedges against exchange rate fluctuations of future accounts receivable and accounts payable under contracts-in-process which are denominated in foreign currencies. We follow SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), which among other things requires that all derivative instruments be recorded on the balance sheet at their fair value. Upon filing Chapter 11, SS/L's hedges with counterparties (primarily yen denominated forward contracts) were cancelled leaving SS/L vulnerable to foreign currency fluctuations in the future. The inability to enter into forward contracts exposes SS/L's future revenues, costs and cash associated with anticipated yen denominated receipts and payments to currency fluctuations. Income Taxes As a Bermuda company, we are subject to U.S. federal, state and local income taxation at regular corporate rates plus an additional 30% "branch profits" tax on any income that is effectively connected with the conduct of a U.S. trade or business. Loral's U.S. subsidiaries are subject to regular corporate tax on their worldwide income. Deferred income taxes reflect the future tax effect of temporary differences between the carrying amount of assets and liabilities for financial and income tax reporting and are measured by applying statutory tax rates in effect for the year during which the differences are expected to reverse. The deferred tax assets are reduced by a valuation allowance to the extent it is more likely than not that the deferred tax assets will not be realized. Our policy is to establish a tax contingency accrual for potential audit issues. The tax contingency accrual is based on our estimate of whether additional taxes will be due in the future. Any additional taxes due will be determined only upon completion of current and future federal, state and international tax audits. The timing of such payments cannot be determined but we expect they will not be made within one year. Any such liability would be unsecured pre-petition liabilities in our bankruptcy proceedings and will be afforded the treatment set forth in the plan of reorganization approved by the Bankruptcy Court. Therefore, the tax contingency liability is included in "Liabilities Subject to Compromise" in the accompanying condensed consolidated balance sheet (see Note 4). As of May 20, 2005, Loral continues to maintain the 100% valuation allowance against the net deferred tax assets of its U.S. consolidated group, established at December 31, 2002 and recorded no benefit for its domestic loss. The income tax provision for continuing operations includes any change to this valuation allowance, any provision for current federal, state and foreign income taxes and any adjustment to tax contingency accruals for potential audit issues. The tax contingency accruals are based on our estimate of whether additional taxes will be due in the future. Any additional taxes due will be determined only upon completion of current and future federal, state and international tax audits. The timing of such payments cannot be determined but we expect they will not be made within one year. Any such liability would be unsecured pre-petition liabilities in our bankruptcy proceedings and will be afforded the treatment set forth in the plan of reorganization approved by the Bankruptcy Court. Therefore, the tax contingency liability is included in "Liabilities Subject to Compromise" in the accompanying Condensed Consolidated Balance Sheets. 4. LIABILITIES SUBJECT TO COMPROMISE As discussed in Note 2, we and our Debtor Subsidiaries have been operating as debtors in possession under the jurisdiction of the Bankruptcy Court and in accordance with the provisions of the Bankruptcy Code. On the condensed consolidated balance sheets, the caption "liabilities subject to compromise" reflects our carrying value of prepetition claims that will be restructured in our Chapter 11 Cases. Pursuant to court order, we have been authorized to pay certain prepetition operating liabilities incurred in the ordinary course of business (e.g. salaries and insurance). Since July 15, 2003, as permitted under the Bankruptcy Code, we have rejected certain of our prepetition contracts and are calculating our estimated liability 10 to the unsecured creditors affected by these rejections. The Bankruptcy Court established January 26, 2004 as the bar date in the Debtors' Chapter 11 Cases, which is the date by which prepetition claims against us and our Debtor Subsidiaries were to have been filed for claimants to receive any distribution in the Chapter 11 Cases. Differences between liability amounts estimated by us and claims filed by our creditors are being investigated and the Bankruptcy Court will make a final determination of the allowable claims. The determination of how liabilities ultimately will be treated cannot be made until the Bankruptcy Court approves a Chapter 11 plan of reorganization. (See Note 2). We will continue to evaluate the amount and classification of our prepetition liabilities through the remainder of our Chapter 11 Cases. Should we identify additional liabilities subject to compromise, we will recognize them accordingly. As a result, "liabilities subject to compromise" may change. Claims classified as "liabilities subject to compromise" represent secured as well as unsecured claims. Liabilities subject to compromise at May 20, 2005 consisted of the following (in thousands): Debt obligations (Note 4) ....................................... $1,270 Accounts payable ................................................ 55 Accrued employment costs ........................................ 1 Customer advances ............................................... 29 Accrued interest and preferred dividends ........................ 40 Income taxes payable ............................................ 41 Pension and other postretirement liabilities .................... 186 Other liabilities ............................................... 78 6% Series C convertible redeemable preferred stock .............. 187 6% Series D convertible redeemable preferred stock .............. 37 ------ $1,924 ======
DEBT OBLIGATION Debt consists of the following at May 20, 2005 (in millions): Loral Orion 10.00% senior notes due 2006: Principal amount............................................................ $ 613 Accrued interest (deferred gain on debt exchanges).......................... 214 Loral 9.50% Senior notes due 2006............................................. 350 Loral Orion debt non-recourse to Loral: 11.25% Senior notes due 2007 (principal amount $37 million)................. 39 12.50% Senior discount notes due 2007 (principal amount $49 million)........ 54 ----------- Total debt.................................................................... 1,270 Less, current maturities included in liabilities subject to compromise (Note 4) 1,270 ----------- $ -- ===========
As a result of our voluntary petitions for reorganization, all of our prepetition debt obligations were accelerated. A creditors' committee was appointed in the Chapter 11 Cases to represent all unsecured creditors, including all of our debt holders and, in accordance with the provisions of the Bankruptcy Code, the committee has the right to be heard on all matters that come before the Bankruptcy Court (see Note 2). On March 17, 2004, we repaid all $967 million of our outstanding secured bank debt. As of May 20, 2005, the principal amounts of our prepetition debt obligations were $1.049 billion. Subsequent to our voluntary petitions for reorganization on July 15, 2003, we only recognized and paid interest on our secured bank debt through March 18, 2004 and stopped recognizing and paying interest on all other outstanding debt obligations. While we are in Chapter 11, we only recognize interest expense to the extent paid. For the month ended May 20, 2005, we did not recognize approximately $4 million of interest expense on our 9.5%, 11.25% and 12.5% senior notes and approximately $5 million of a reduction to accrued interest on our 10% senior notes as a result of the suspension of interest payments on our debt obligations. 5. REORGANIZATION INCOME (EXPENSES) DUE TO BANKRUPTCY Reorganization expenses due to bankruptcy for the period from April 22, 2005 to May 20, 2005, were as follows (in millions): Professional fees ........................................................ $2 Vendor settlement (gain) ................................................. -- Facility closing costs ................................................... -- Interest income .......................................................... -- -- -- Total reorganization expenses due to bankruptcy ........................ $2 ==
11 6. INSURANCE Premiums to date for all insurance policies, including worker's compensation and disability insurance, have been paid and are in full force and effect. 12 LORAL SPACE & COMMUNICATIONS LTD., ET AL., DEBTORS IN POSSESSION INDEX OF BANKRUPTCY COURT REPORTING SCHEDULES BY DEBTOR
SCHEDULE ----------- Gross salaries & wages I Employer payroll taxes withheld I Employer payroll taxes due I Gross taxable sales II Sales/VAT taxes collected II Property taxes III Other taxes IV Total third party disbursements V
13 SCHEDULE I LORAL SPACE & COMMUNICATIONS LTD., ET AL., DEBTORS IN POSSESSION GROSS SALARIES & WAGES AND PAYROLL TAXES BY DEBTOR FOR THE PERIOD FROM APRIL 22, 2005 TO MAY 20, 2005 (IN THOUSANDS)
EMPLOYEE GROSS PAYROLL EMPLOYER SALARIES & TAXES PAYROLL LEGAL ENTITY CASE NUMBER WAGES WITHHELD TAXES DUE - ------------ ----------- ----- -------- --------- Loral Space & Communications Ltd. 03-41710 (RDD) $ -- $ -- $ -- Loral Space & Communications Corporation 03-41711 (RDD) -- -- -- Loral SpaceCom Corporation (a) 03-41709 (RDD) 2,489 718 136 Loral Satellite, Inc. 03-41712 (RDD) -- -- -- Space Systems/Loral, Inc. (b) 03-41713 (RDD) 10,154 2,707 729 Loral Communications Services, Inc. (b) 03-41714 (RDD) 294 84 20 Loral Ground Services, L.L.C 03-41715 (RDD) -- -- -- Loral Orion, Inc. 03-41716 (RDD) -- -- -- Loral CyberStar Global Services, Inc. 03-41717 (RDD) -- -- -- Loral CyberStar GmbH 03-41718 (RDD) -- -- -- Loral CyberStar Japan, Inc. 03-41719 (RDD) -- -- -- Loral CyberStar Services, Inc. 03-41720 (RDD) -- -- -- Loral CyberStar Holdings, L.L.C 03-41721 (RDD) -- -- -- Loral CyberStar International, Inc. 03-41722 (RDD) -- -- -- Loral Asia Pacific Satellite (HK) Limited 03-41723 (RDD) -- -- -- SS/L Export Corporation 03-41724 (RDD) -- -- -- CyberStar, L.P. 03-41725 (RDD) -- -- -- CyberStar, L.L.C 03-41726 (RDD) -- -- -- Loral Skynet Network Services, Inc. 03-41727 (RDD) 38 10 -- Loral Licensing Ltd. 03-41728 (RDD) -- -- -- ------- ------ ---- $12,975 $3,519 $885 ======= ====== ====
(a) Taxes for a division of the legal entity are remitted to a third party vendor and paid by the third party vendor to the appropriate taxing authorities. (b) Taxes are remitted by the legal entity to a third party vendor and paid by the third party vendor to the appropriate taxing authorities. 14 SCHEDULE II LORAL SPACE & COMMUNICATIONS LTD., ET AL., DEBTORS IN POSSESSION GROSS TAXABLE SALES AND SALES/VAT TAXES COLLECTED FOR THE PERIOD FROM APRIL 22, 2005 TO MAY 20, 2005 (IN THOUSANDS)
GROSS SALES/VAT TAXABLE TAXES LEGAL ENTITY CASE NUMBER SALES COLLECTED - ------------ ----------- ----- --------- Loral Space & Communications Ltd. 03-41710 (RDD) $ -- $-- Loral Space & Communications Corporation 03-41711 (RDD) -- -- Loral SpaceCom Corporation 03-41709 (RDD) -- -- Loral Satellite, Inc. 03-41712 (RDD) -- -- Space Systems/Loral, Inc. 03-41713 (RDD) -- -- Loral Communications Services, Inc. 03-41714 (RDD) -- -- Loral Ground Services, L.L.C 03-41715 (RDD) -- -- Loral Orion, Inc. 03-41716 (RDD) -- -- Loral CyberStar Global Services, Inc. 03-41717 (RDD) -- -- Loral CyberStar GmbH 03-41718 (RDD) 123 20 Loral CyberStar Japan, Inc. 03-41719 (RDD) -- -- Loral CyberStar Services, Inc. 03-41720 (RDD) -- -- Loral CyberStar Holdings, L.L.C 03-41721 (RDD) -- -- Loral CyberStar International, Inc. 03-41722 (RDD) -- -- Loral Asia Pacific Satellite (HK) Limited 03-41723 (RDD) -- -- SS/L Export Corporation 03-41724 (RDD) -- -- CyberStar, L.P. 03-41725 (RDD) -- -- CyberStar, L.L.C 03-41726 (RDD) -- -- Loral Skynet Network Services, Inc. 03-41727 (RDD) 10 2 Loral Licensing Ltd. 03-41728 (RDD) -- -- ---- --- $133 $22 ==== ===
15 SCHEDULE III LORAL SPACE & COMMUNICATIONS LTD., ET AL., DEBTORS IN POSSESSION PROPERTY TAXES BY DEBTOR FOR THE PERIOD FROM APRIL 22, 2005 TO MAY 20, 2005 (IN THOUSANDS)
PROPERTY PROPERTY TAXES TAXES LEGAL ENTITY CASE NUMBER INCURRED PAID - ------------ ----------- -------- ---- Loral Space & Communications Ltd. 03-41710 (RDD) $ -- $-- Loral Space & Communications Corporation 03-41711 (RDD) -- -- Loral SpaceCom Corporation 03-41709 (RDD) 14 4 Loral Satellite, Inc. 03-41712 (RDD) -- -- Space Systems/Loral, Inc. 03-41713 (RDD) 210 -- Loral Communications Services, Inc. 03-41714 (RDD) -- -- Loral Ground Services, L.L.C 03-41715 (RDD) -- -- Loral Orion, Inc. 03-41716 (RDD) -- -- Loral CyberStar Global Services, Inc. 03-41717 (RDD) -- -- Loral CyberStar GmbH 03-41718 (RDD) -- -- Loral CyberStar Japan, Inc. 03-41719 (RDD) -- -- Loral CyberStar Services, Inc. 03-41720 (RDD) -- -- Loral CyberStar Holdings, L.L.C 03-41721 (RDD) -- -- Loral CyberStar International, Inc. 03-41722 (RDD) -- -- Loral Asia Pacific Satellite (HK) Limited 03-41723 (RDD) -- -- SS/L Export Corporation 03-41724 (RDD) -- -- CyberStar, L.P. 03-41725 (RDD) -- -- CyberStar, L.L.C 03-41726 (RDD) -- -- Loral Skynet Network Services, Inc. 03-41727 (RDD) 20 80 Loral Licensing Ltd. 03-41728 (RDD) -- -- ---- --- $244 $84 ==== ===
16 SCHEDULE IV LORAL SPACE & COMMUNICATIONS LTD., ET AL., DEBTORS IN POSSESSION OTHER TAXES BY DEBTOR FOR THE PERIOD FROM APRIL 22, 2005 TO MAY 20, 2005 (IN THOUSANDS)
UNIVERSAL SERVICE TOTAL STATE/CITY FUND FEDERAL FOREIGN OTHER LEGAL ENTITY CASE NUMBER TAXES TAXES TAXES TAXES TAXES - ------------ ----------- ----- ----- ----- ----- ----- Loral Space & Communications Ltd. 03-41710 (RDD) $-- $ -- $ -- $ -- $ -- Loral Space & Communications Corporation 03-41711 (RDD) -- -- -- -- -- Loral SpaceCom Corporation 03-41709 (RDD) (1) 1 -- -- 1 Loral Satellite, Inc. 03-41712 (RDD) -- -- -- -- -- Space Systems/Loral, Inc. 03-41713 (RDD) -- -- -- -- -- Loral Communications Services, Inc. 03-41714 (RDD) -- -- -- -- -- Loral Ground Services, L.L.C 03-41715 (RDD) -- -- -- -- -- Loral Orion, Inc. 03-41716 (RDD) -- -- -- 0 0 Loral CyberStar Global Services, Inc. 03-41717 (RDD) -- -- -- -- -- Loral CyberStar GmbH 03-41718 (RDD) -- -- -- -- -- Loral CyberStar Japan, Inc. 03-41719 (RDD) -- -- -- -- -- Loral CyberStar Services, Inc. 03-41720 (RDD) -- -- -- -- -- Loral CyberStar Holdings, L.L.C 03-41721 (RDD) -- -- -- -- -- Loral CyberStar International, Inc. 03-41722 (RDD) -- -- -- -- -- Loral Asia Pacific Satellite (HK) Limited 03-41723 (RDD) -- -- -- -- -- SS/L Export Corporation 03-41724 (RDD) -- -- -- -- -- CyberStar, L.P. 03-41725 (RDD) -- -- -- -- -- CyberStar, L.L.C 03-41726 (RDD) -- -- -- -- -- Loral Skynet Network Services, Inc. 03-41727 (RDD) -- 4 -- (30) (26) Loral Licensing Ltd. 03-41728 (RDD) -- -- -- -- -- --- ---- ---- ---- ---- $(1) $ 5 $ -- $(30) $(25) === ==== ==== ==== ====
17 SCHEDULE V LORAL SPACE & COMMUNICATIONS LTD., ET AL., DEBTORS IN POSSESSION TOTAL THIRD PARTY DISBURSEMENTS BY DEBTOR FOR THE PERIOD FROM APRIL 22, 2005 TO MAY 20, 2005 (IN THOUSANDS)
LEGAL ENTITY CASE NUMBER DISBURSEMENTS - ------------ ----------- ------------- Loral Space & Communications Ltd. 03-41710 (RDD) $ 51 Loral Space & Communications Corporation 03-41711 (RDD) -- Loral SpaceCom Corporation 03-41709 (RDD) 14,197 Loral Satellite, Inc. 03-41712 (RDD) -- Space Systems/Loral, Inc. 03-41713 (RDD) 30,735 Loral Communications Services, Inc. 03-41714 (RDD) 281 Loral Ground Services, L.L.C 03-41715 (RDD) -- Loral Orion, Inc. 03-41716 (RDD) -- Loral CyberStar Global Services, Inc. 03-41717 (RDD) -- Loral CyberStar GmbH 03-41718 (RDD) 94 Loral CyberStar Japan, Inc. 03-41719 (RDD) -- Loral CyberStar Services, Inc. 03-41720 (RDD) -- Loral CyberStar Holdings, L.L.C 03-41721 (RDD) -- Loral CyberStar International, Inc. 03-41722 (RDD) -- Loral Asia Pacific Satellite (HK) Limited 03-41723 (RDD) -- SS/L Export Corporation 03-41724 (RDD) -- CyberStar, L.P. 03-41725 (RDD) -- CyberStar, L.L.C 03-41726 (RDD) -- Loral Skynet Network Services, Inc. 03-41727 (RDD) -- Loral Licensing Ltd. 03-41728 (RDD) -- ------- $45,358 =======
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