-----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, U4r4Fx9NnzaLbSVwnVlSrTxgfI2aQEgvZPNPBIuXjKrFUagCEktRfVH7SM5LCY+g fKcr9lgT407XFmOBRcPCQw== 0000950123-97-005643.txt : 19970709 0000950123-97-005643.hdr.sgml : 19970709 ACCESSION NUMBER: 0000950123-97-005643 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970623 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970708 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LORAL SPACE & COMMUNICATIONS LTD CENTRAL INDEX KEY: 0001006269 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] 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: 97637166 BUSINESS ADDRESS: STREET 1: 600 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126971105 MAIL ADDRESS: STREET 1: 600 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10016 8-K 1 LORAL SPACE & COMMUNICATIONS LTD 1 ================================================================================ 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) JUNE 23, 1997 COMMISSION FILE NUMBER: 1-14180 ------------------------ LORAL SPACE & COMMUNICATIONS LTD. 600 THIRD AVENUE NEW YORK, NEW YORK 10016 TELEPHONE: (212) 697-1105 JURISDICTION OF INCORPORATION: ISLANDS OF BERMUDA IRS IDENTIFICATION NUMBER: 13-3867424 ================================================================================ 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On June 23, 1997, Loral Space & Communications Ltd., a Bermuda company (the "Company" or "Loral"), acquired, subject to certain governmental approvals, the 24.5% minority interest in Space Systems/Loral, Inc., a Delaware corporation ("SS/L"), held in the aggregate by Aerospatiale SNI ("Aerospatiale") and Alcatel Espace ("Alcatel") for consideration consisting in the aggregate of 8,042,922 shares of Loral common stock and 1,063,663 shares of Loral 6% Series C Convertible Redeemable Preferred Stock. After giving effect to these acquisitions, Loral owns 100% of SS/L. Aerospatiale and Alcatel, together with Finmeccanica S.p.A., whose minority interest in SS/L had previously been acquired by Loral in exchange for Loral securities, will retain their alliance relationship with SS/L including their representation on the Board of Directors of SS/L. SS/L is a full-service provider of commercial communications satellite systems and services, including, launch and insurance procurement and mission operations from its mission control center in Palo Alto, California. ITEM 5. OTHER EVENTS. On April 15, 1997, pursuant to a Transaction Agreement dated as of March 20, 1997 between Loral and Alenia Inc. ("Alenia"), Loral acquired from Alenia 1,488,372 limited partner interests in Loral/Qualcomm Satellite Services, L.P. ("LQSS"), managing general partner of Globalstar, L.P., for $80 million in cash. On June 19, 1997, pursuant to a Purchase and Sale Agreement dated as of June 19, 1997 between Loral and Alcatel Spacecom, Loral acquired from Alcatel Spacecom 720,000 limited partner interests in LQSS in exchange for $17,487,360 in cash and 1,255,684 shares of Loral common stock. After giving effect to these transactions, Loral owns, directly or indirectly, approximately 38% of Globalstar, on a fully diluted basis. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED Financial Statements of Space Systems/Loral, Inc. and Independent Auditors' Report* (B) PRO FORMA FINANCIAL INFORMATION Unaudited Pro Forma Condensed Consolidated Financial Statements of Loral Space & Communications Ltd., Space Systems/Loral, Inc. and AT&T Skynet Satellite Services as of March 31, 1997 and for the three months ended March 31, 1997 and the nine months ended December 31, 1996. (C) EXHIBITS. Exhibit 10.1 Exchange Agreement dated as of June 18, 1997 among Loral Space & Communications Ltd., Aerospatiale SNI and Alcatel Espace Exhibit 10.2 Alliance Agreement dated as of June 23, 1997 among Loral Space & Communications Ltd., Aerospatiale SNI, Alcatel Espace and Finmeccanica S.p.A. Exhibit 10.3 Registration Rights Agreement (Series C Preferred Stock) dated as of March 31, 1997 between Loral Space & Communications Ltd. and Finmeccanica S.p.A. and dated as of June 23, 1997 among Loral Space & Communications Ltd., Aerospatiale SNI and Alcatel Espace Exhibit 10.4 Registration Rights Agreement (Common Stock) dated as of June 23, 1997 among Loral Space & Communications Ltd., Aerospatiale SNI and Alcatel Espace
3 Exhibit 10.5 Transaction Agreement dated as of March 20, 1997 between Loral Space & Communications Ltd. and Alenia Inc. Exhibit 10.6 Purchase and Sale Agreement dated as of June 19, 1997 between Loral Space & Communications Ltd. and Alcatel Spacecom
- --------------- * Incorporated by reference to the Company's Annual Report on Form 10-K for the period from April 1, 1996 to December 31, 1996. Financial Statements as of and for the three months ended March 31, 1997 are not required because Space Systems/Loral, Inc. is included in the consolidated financial statements of Loral included in Loral's Quarterly Report on Form 10-Q for the first quarter of 1997. 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. -------------------------------------- Registrant By: /s/ MICHAEL P. DEBLASIO ------------------------------------ Michael P. DeBlasio Senior Vice President -- Finance Date: July 8, 1997 2 4 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND NINE MONTHS ENDED DECEMBER 31, 1996 The following unaudited pro forma condensed consolidated balance sheet as of March 31, 1997 and statements of income for the three months ended March 31, 1997 and the nine months ended December 31, 1996 give effect to the acquisition between March 25, 1997 and June 23, 1997 by Loral Space & Communications Ltd. ("Loral") of the remaining Space Systems/Loral ("SS/L") common stock not previously owned, pursuant to agreements negotiated in February 1997, and the acquisition by Loral of AT&T Skynet Satellite Services ("Skynet") on March 14, 1997. The unaudited pro forma condensed consolidated balance sheet assumes the acquisitions occurred as of March 31, 1997. The unaudited pro forma condensed consolidated statements of income assume the acquisitions occurred as of April 1, 1996. The unaudited pro forma balance sheet information presented is based on the historical unaudited condensed consolidated balance sheet of Loral as of March 31, 1997 which includes the assets and liabilities of SS/L and Skynet as of that date. The pro forma income statement information for the three months ended March 31, 1997 is based on the historical unaudited condensed consolidated statement of income of Loral which includes the results of the operations of SS/L from January 1, 1997 and the elimination of minority interest, and of Skynet for the period January 1, 1997 to March 14, 1997. The pro forma income statement information for the nine months ended December 31, 1996 is based on the historical condensed consolidated statements of income of Loral and SS/L as well as the condensed statement of income of Skynet for that period. The unaudited pro forma condensed consolidated financial statements reflect the purchase method of accounting and the adjustments and assumptions described in the accompanying notes. The pro forma adjustments are based upon preliminary estimates of fair values. Actual adjustments will be based on final appraisals and other analyses of fair values. The unaudited pro forma condensed consolidated balance sheet and statements of income should be read in conjunction with the audited consolidated financial statements and notes of the respective companies. The pro forma data may not be indicative of the results that actually would have occurred if the acquisitions had taken place on April 1, 1996, or future results. 3 5 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 (In thousands, except share data)
LORAL PRO FORMA AS REPORTED CONSOLIDATED ----------- PRO FORMA ---------- ADJUSTMENTS ----------- (NOTE 1) ASSETS Current assets: Cash and cash equivalents........................ $ 605,566 $ (9,220)(a) $ 596,346 Contracts in process............................. 321,432 -- 321,432 Inventories...................................... 101,553 -- 101,553 Other assets..................................... 91,839 -- 91,839 ---------- --------- ---------- Total current assets..................... 1,120,390 (9,220) 1,111,170 Property, plant and equipment, net............... 677,897 -- 677,897 Cost in excess of net assets acquired, less amortization.................................. 384,785 56,996(a)(c) 441,781 Long-term receivables............................ 86,902 -- 86,902 Investments in affiliates........................ 232,218 18,651(c) 250,869 Other assets..................................... 79,450 -- 79,450 ---------- --------- ---------- $ 2,581,642 $ 66,427 $2,648,069 ========== ========= ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt................ $ 2,146 -- 2,146 Accounts payable................................. 132,880 -- 132,880 Accrued employment costs......................... 38,060 -- 38,060 Customer advances................................ 50,706 -- 50,706 Accrued interest................................. 8,079 -- 8,079 Other current liabilities........................ 66,799 -- 66,799 Income taxes payable............................. 6,589 -- 6,589 Deferred income taxes............................ 62,710 -- 62,710 ---------- --------- ---------- Total current liabilities................ 367,969 -- 367,969 Deferred income taxes............................ 41,159 -- 41,159 Pension and other postretirement liabilities..... 54,175 -- 54,175 Long-term liabilities............................ 19,192 -- 19,192 Long-term debt................................... 231,532 -- 231,532 Minority interest................................ 120,573 (120,573)(a) -- Convertible preferred equivalent obligations..... 677,379 (677,379)(a)(e) -- Shareholders' equity: Series A convertible preferred stock, par value $.01.................................. 459 -- 459 Series C convertible preferred stock, par value $.01.................................. -- 139(a)(e) 139 Common stock, par value $.01.................. 1,911 80(a) 1,991 Paid-in capital............................... 1,058,822 864,160(a)(e) 1,922,982 Retained earnings............................. 8,471 -- 8,471 ---------- --------- ---------- Total shareholders's equity.............. 1,069,663 864,379 1,934,042 ---------- --------- ---------- $ 2,581,642 $ 66,427 $2,648,069 ========== ========= ==========
4 6 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1997 (In thousands, except per share amounts) Periods combined: Loral: January 1, 1997 to March 31, 1997 Skynet: January 1, 1997 to March 14, 1997
PRO FORMA ADJUSTMENTS PRO FORMA LORAL SKYNET --------------- CONSOLIDATED -------- -------- (NOTE 1) ------------ Revenues................................. $340,353 $ 17,938 $ (24,829)(c) $333,462 Costs and expenses....................... 331,138 14,066 (21,243)(c)(h) 323,961 -------- -------- --------------- ------------ Operating income....................... 9,215 3,872 (3,586) 9,501 Interest income (expense), net........... 10,139 (2,500) (5,573)(b)(g) 2,066 -------- -------- --------------- ------------ Income before income taxes, minority interest and equity in net loss of affiliates.......................... 19,354 1,372 (9,159) 11,567 Income taxes............................. 9,339 576 (2,616)(d)(i) 7,299 -------- -------- --------------- ------------ Income before minority interest and equity in net loss of affiliates.... 10,015 796 (6,543) 4,268 Minority interest........................ (3,244) -- 3,244(c) -- Equity in net loss of affiliates......... (7,177) -- -- (7,177) -------- -------- --------------- ------------ Net income (loss)...................... $ (406) $ 796 $ (3,299) $ (2,909) ======== ======= ============ ========= Earnings (loss) per share (note 2): Primary................................ $ 0.00 $ (0.01) -------- ------------ Fully diluted.......................... $ 0.00 $ (0.01) -------- ------------ Weighted average shares outstanding: Primary................................ 236,989 245,032 -------- ------------ Fully diluted.......................... 236,989 245,032 -------- ------------
5 7 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED DECEMBER 31, 1996 (In thousands, except per share data)
PRO FORMA ADJUSTMENTS PRO FORMA LORAL SS/L SKYNET -------- CONSOLIDATED -------- ---------- -------- (NOTE 1) ------------ Revenues............................. $ 5,088 $1,017,653 $ 84,435 $(96,488)(c) $ 1,010,688 Costs and expenses................... 17,606 963,517 39,051 (59,913)(c)(h) 960,261 ------- ---------- ------- ------- ---------- Operating income (loss)............ (12,518) 54,136 45,384 (36,575) 50,427 Interest income (expense), net....... 28,699 6,081 (11,305) (30,767)(b)(g) (7,292) ------- ---------- ------- ------- ---------- Income before income taxes and equity in net loss of affiliates...................... 16,181 60,217 34,079 (67,342) 43,135 Income taxes......................... 2,912 27,643 13,369 (23,248)(d)(i) 20,676 ------- ---------- ------- ------- ---------- Income before equity in net loss of affiliates...................... 13,269 32,574 20,710 (44,094) 22,459 Equity in net loss of affiliates..... (4,392) (1,549) -- (13,396)(c) (19,337) ------- ---------- ------- ------- ---------- Net income......................... $ 8,877 $ 31,025 $ 20,710 $(57,490) $ 3,122 ======= ========== ======= ======= ========== Earnings per share (note 2): Primary............................ $ 0.04 $ 0.01 ------- ---------- Fully diluted...................... $ 0.04 $ 0.01 ------- ---------- Weighted average shares outstanding: Primary............................ 229,396 241,026 ======= ========== Fully diluted...................... 229,396 241,026 ======= ==========
6 8 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND NINE MONTHS ENDED DECEMBER 31, 1996 1. The following facts and assumptions in notes (a) through (e) were used in determining the pro forma effect of the increase in Loral's ownership of SS/L to 100%. a) Pursuant to agreements negotiated in December 1996 and February 1997, Loral acquired 49% of SS/L from four international aerospace and communications companies (the "Alliance Partners") between March 25, 1997 and June 23, 1997 for $374 million. The first two transactions, in which Loral acquired 24.5% of SS/L for $93.5 million in cash and $93.5 million in convertible preferred equivalent obligations ("CPEOs") were reflected in Loral's historical unaudited condensed consolidated balance sheet as of March 31, 1997. The remaining 24.5% of SS/L was acquired on June 23, 1997, subject to certain governmental approvals, for $187.0 million, consisting of 8,042,922 shares of Loral common stock and 1,063,663 shares of Loral 6% Series C convertible redeemable preferred stock. Pro forma adjustments to the March 31, 1997 balance sheet assume the June transactions occurred as of March 31, 1997. In August 1996, Loral increased its ownership of SS/L to 51% through the acquisition of an 18.3% interest held by certain partnerships affiliated with Lehman Brothers (the "Lehman Partnerships") for $110.0 million including cash of $4 million, 7.5 million shares of Loral common stock and 267,256 shares of common stock of Globalstar Telecommunications Ltd. previously held by a Loral subsidiary. In accordance with the terms of Loral's agreement with the Lehman Partnerships, the purchase price was increased by $9.2 million in April 1997. Loral increased its ownership of SS/L to 75.5% during the first quarter of 1997. Accordingly, Loral discontinued the equity method of accounting and began consolidating the results of SS/L as of January 1, 1997, with a reduction for SS/L's earnings attributable to its other shareholders. The acquisition of SS/L common stock has been accounted for as a purchase. The cost in excess of net assets acquired arising from this acquisition is being amortized over 40 years. Loral's historical unaudited condensed consolidated statement of income for the three months ended March 31, 1997 reflects the results of operations of SS/L from January 1, 1997 and the elimination of the minority interest of the SS/L equity not owned by Loral during the period. Loral's historical unaudited condensed consolidated statement of income for the nine months ended December 31, 1996 includes SS/L's operations using the equity method of accounting. Pro forma adjustments assume that Loral had acquired 100% of the common stock of SS/L as of April 1, 1996. b) The purchase price for SS/L was determined through arm's length bargaining between Loral and the Alliance Partners and Loral and the Lehman Partnerships. The cash portion of the acquisition was financed with cash on hand. The unaudited pro forma condensed consolidated statements of income reflect charges for interest expense of 7% on the cash portion of the purchase price and 6% on the CPEOs and preferred stock portion of the purchase price. c) The estimated excess of purchase price over net assets acquired of $119.9 million is being amortized over 40 years. Further, the unaudited pro forma condensed consolidated balance sheet includes $51.2 million to record the estimated proportionate excess of fair value of SS/L's investment in Globalstar over the carrying value. The pro forma adjustment of $18.7 million represents the increment related to the 24.5% of SS/L acquired subsequent to March 31, 1997. Other pro forma adjustments for the three months ended March 31, 1997 include elimination of SS/L's sales to Skynet of $24.8 million and related cost of sales of $22.5 million for the period from January 1, 1997 through March 14, 1997, the date of the Skynet acquisition, and elimination of the minority interest remaining in SS/L during the period. Other pro forma adjustments for the nine months ended December 31, 1996 include elimination of SS/L's sales to Skynet of $96.5 million and related cost of sales of $82.1 million and elimination of Loral's equity in the net income of SS/L based on its historical ownership interest during the period. 7 9 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Other adjustments related to differences between fair values of assets acquired and their carrying amounts are currently being evaluated. However, any effect is not expected to be significant. d) A statutory (Federal and state) tax rate of 41%, adjusted for non-deductible interest and goodwill, was assumed with respect to the pro forma adjustments. e) The CPEOs were subject to mandatory exchange into shares of Loral's 6% Series C Convertible Redeemable Preferred Stock ("Preferred Stock") after approval by shareholders on April 30, 1997. Accordingly, a pro forma adjustment has been included in the unaudited pro forma condensed consolidated balance sheet to reflect the exchange of all CPEOs into Preferred Stock. The following facts and assumptions in notes (f) through (i) were used in determining the pro forma effect of the acquisition of Skynet from AT&T. f) On March 14, 1997 Loral acquired certain assets of Skynet for $478.1 million in cash. The price reflects a reduction from the $712.5 million price originally agreed upon in September 1996 arising from an adjustment resulting from the failure of Skynet's Telstar 401 Satellite in January 1997. The price is subject to further adjustment based upon net assets delivered at closing, as defined. This acquisition has been accounted for as a purchase. Loral's historical unaudited condensed consolidated statement of income for the three months ended March 31, 1997 reflects the operations of Skynet from the date of acquisition through March 31, 1997. The Skynet historical unaudited condensed statement of income included in the unaudited pro forma condensed consolidated statement of income for the three months ended March 31, 1997 represents its operating results from January 1, 1997 to the date of acquisition and excludes the charge related to the loss of the Telstar 401 Satellite. Pro forma adjustments have been calculated for that period. The Skynet historical unaudited condensed statement of income included in the unaudited pro forma condensed consolidated statement of income for the nine months ended December 31, 1996 includes the operations of Skynet for the entire period. The Skynet operations have been calculated by deducting the Skynet operations for the three month period ended March 31, 1996 from the Skynet operations for the year ended December 31, 1996. Revenues, operating income and net income for Skynet for the three months ended March 31, 1996 were $39.9 million, $19.0 million and $9.3 million, respectively. Pro forma adjustments have been calculated for the nine month period. g) The purchase price for Skynet was determined through arm's length bargaining between Loral and AT&T. The acquisition was initially financed with cash on hand. A significant portion of the purchase price is expected to be refinanced with debt. The pro forma adjustment for interest expense reflects charges for interest based on an adjusted purchase price of $478.1 million for the three months ended March 31, 1997 and an unadjusted purchase price of $712.5 million for the nine months ended December 31, 1996 at an assumed interest rate of 7%, reduced for capitalized interest of $2.9 million for the three months ended March 31, 1997 and $7.5 million for the nine months ended December 31, 1996 and interest expense recorded by Skynet of $2.5 million for the three months ended March 31, 1997 and $11.3 million for the nine months ended December 31, 1996. The unadjusted purchase price of $712.5 million was used as the basis of the interest expense calculation during the nine months ended December 31, 1996 because Telstar 401 was operating and generating revenues during that entire period. h) The estimated excess of purchase price over net assets acquired of $96.1 million is being amortized over 40 years. Other purchase accounting adjustments to the unaudited pro forma condensed consolidated statement of income for the three months ended March 31, 1997, pursuant to the provisions of Accounting Principles Board Opinion No. 16, include charges for depreciation over an estimated weighted average 12.5 year life of the excess of fair value of depreciable fixed assets over the historical book value of $12.9 million. Other purchase accounting adjustments to the unaudited pro forma condensed consolidated statement of income for the nine months ended December 31, 1996 include 8 10 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) charges for depreciation over an estimated weighted average ten year life of the excess of fair value of depreciable fixed assets over the historical book value of $246.9 million. For purposes of this adjustment, fair value of depreciable fixed assets includes the estimated fair value of Telstar 401, and historical book value includes the carrying value of Telstar 401. i) A statutory (Federal and state) tax rate of 39% was assumed with respect to the pro forma adjustments. 2. Primary and fully diluted earnings per share are computed based upon the weighted average number of shares of common stock and common equivalent shares (Series A Convertible Preferred Stock) outstanding, after giving pro forma effect to the shares issued for the transactions described above. 9 11 EXHIBIT INDEX
EXHIBIT DESCRIPTION - ------------- ------------------------------------------------------------------------------- Exhibit 10.1 Exchange Agreement dated as of June 18, 1997 among Loral Space & Communications Ltd., Aerospatiale SNI and Alcatel Espace Exhibit 10.2 Alliance Agreement dated as of June 23, 1997 among Loral Space & Communications Ltd., Aerospatiale SNI, Alcatel Espace and Finmeccanica S.p.A. Exhibit 10.3 Registration Rights Agreement (Series C Preferred Stock) dated as of March 31, 1997 between Loral Space & Communications Ltd. and Finmeccanica S.p.A. and dated as of June 23, 1997 among Loral Space & Communications Ltd., Aerospatiale SNI and Alcatel Espace Exhibit 10.4 Registration Rights Agreement (Common Stock) dated as of June 23, 1997 among Loral Space & Communications Ltd., Aerospatiale SNI and Alcatel Espace Exhibit 10.5 Transaction Agreement dated as of March 20, 1997 between Loral Space & Communications Ltd. and Alenia Inc. Exhibit 10.6 Purchase and Sale Agreement dated as of June 19, 1997 between Loral Space & Communications Ltd. and Alcatel Spacecom
10 EX-10.1 2 EXCHANGE AGREEMENT 1 Exhibit 10.1 EXCHANGE AGREEMENT by and among LORAL SPACE & COMMUNICATIONS LTD., AEROSPATIALE SNI and ALCATEL ESPACE ---------------------------------------- Dated as of June 18, 1997 ---------------------------------------- 2 EXCHANGE AGREEMENT EXCHANGE AGREEMENT, dated as of June 18, 1997 ("Agreement"), by and among LORAL SPACE & COMMUNICATIONS LTD., a company organized under the laws of Bermuda ("Loral"), AEROSPATIALE SNI, a societe nationale industrielle organized under the laws of France ("Aerospatiale"), and ALCATEL ESPACE, a societe anonyme organized under the laws of France ("Alcatel") (Aerospatiale and Alcatel collectively the "Stockholders"). W I T N E S S E T H : WHEREAS, on the date hereof, (i) Aerospatiale owns 490 shares of Common Stock, par value $.10 per share, of SS/L (shares of such Common Stock the "SS/L Shares") and (ii) Alcatel owns 490 SS/L Shares; WHEREAS, on March 25, 1997, pursuant to an Exchange Agreement, dated as of December 19, 1996, as amended by Amendment No. 1 thereto, dated as of February 6, 1997 (such Exchange Agreement, as so amended, the "DASA Agreement"), Loral SpaceCom Corporation, a Delaware corporation ("Holdings"), acquired the 490 SS/L Shares owned by Daimler-Benz Aerospace AG ("DASA") in exchange for $93.5 million in cash; WHEREAS, on March 31, 1997, pursuant to a Transaction Agreement, dated as of March 20, 1997 (the "Finmeccanica Agreement"), Loral acquired the 490 SS/L Shares owned by Finmeccanica S.p.A., a societe par azione organized under the laws of Italy ("Finmeccanica"), in exchange for $92.3 million aggregate principal amount of Loral's 6% Convertible Preferred Equivalent Obligations due 2006 (the "CPEOs") having a market value of $93.5 million; and WHEREAS, the parties hereto desire for each of the Stockholders to exchange their SS/L Shares for Loral securities, as set forth in this Agreement, while at the same time, preserving their strategic alliance with SS/L in the field of Space Systems. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1 3 1. THE EXCHANGE 1.1. Exchange. 1.1.1. At the Closing described in Section 1.2. below, Aerospatiale agrees to transfer to Loral the 490 SS/L Shares held by Aerospatiale (the "Aerospatiale SS/L Shares"), and Loral agrees to issue and deliver to Aerospatiale: (i) 3,837,300 shares of Loral Common Stock, par value $.01 per share ("LSC Common Stock"), and (ii) 514,200 shares of Loral's 6% Series C Convertible Redeemable Preferred Shares, par value $.01 per share ("LSC Series C Preferred Shares"). 1.1.2. At the Closing described in Section 1.2. below, Alcatel agrees to transfer to Loral the 490 SS/L Shares held by Alcatel (the "Alcatel SS/L Shares"), and Loral agrees to issue and deliver to Alcatel: (i) 4,205,622 shares of LSC Common Stock and (ii) 549,463 shares of LSC Series C Preferred Shares. 1.1.3. The LSC Series C Preferred Shares issued to the Stockholders pursuant to this Agreement shall be issued under Schedule III to Loral's Second Amended and Restated Bye-laws (the "Series C Schedule"), a complete and accurate copy of which is attached hereto as Exhibit A, and, upon execution by the Stockholders of the Registration Rights Agreement, dated March 31, 1997 ("Series C Reg Rights Agreement"), by and among certain parties including Loral and Finmeccanica, a copy of which is attached hereto as Exhibit B, the Stockholders will be entitled to all the rights of an "Initial Purchaser" and a "Holder" thereunder with this Agreement constituting a "Purchase Agreement" for all purposes of the Series C Reg Rights Agreement. 1.2. Closing. 1.2.1. Time and Place of Closing. The closing ("Closing") of the transactions contemplated by Section 1.1. (the "Exchange") shall take place at the law offices of Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York 10022 or such other place upon which the parties hereto may agree and shall occur on June 23, 1997 or such other date upon which the parties hereto may agree (the "Closing Date"). 1.2.2. Deliveries at Closing. At the Closing, (a) Loral will deliver to the Stockholders share certificates for their respective shares of (i) LSC Common Stock to be issued hereunder (such stock the "LSC Stock") and (ii) LSC Series C Preferred Shares to be issued hereunder (the "LSC Preferred Stock"), all registered in the name or names and denominations as each Stockholder will have requested at least two (2) business days prior to Closing; (b) Aerospatiale will deliver to Loral (or a direct or indirect wholly owned subsidiary of Loral) certificates representing the Aerospatiale SS/L Shares, duly endorsed for transfer or accompanied by stock powers duly executed in blank; 2 4 (c) Alcatel will deliver to Loral (or a direct or indirect wholly owned subsidiary of Loral) certificates representing the Alcatel SS/L Shares, duly endorsed for transfer or accompanied by stock powers duly executed in blank; (d) Loral will deliver to each of the Stockholders the items required by Section 4.1.1. as a condition to the obligations of the Stockholders to consummate the Exchange; (e) Aerospatiale will deliver to Loral the items required by Section 4.1.2. as a condition to Loral's obligation to consummate the Exchange; and (f) Alcatel will deliver to Loral the items required by Section 4.1.2. as a condition to Loral's obligation to consummate the Exchange. 1.2.3. Stock Transfer Taxes. Loral will bear all United States stock transfer taxes, direct or indirect, attributable to the share transfers in the Exchange. 2. NOMINAL VALUE 2.1. For purposes of this Agreement and related arrangements between the parties, including the Alliance Agreement in the form set forth in Exhibit F, the term "Nominal Value" shall mean, regardless of actual value, market value or selling price: (i) with respect to Aerospatiale, (A) $17.0563 for each share of Loral Common Stock until an aggregate of 3,837,300 shares of such stock have been sold or otherwise disposed by Aerospatiale as described in Section 8.1(a)(ii) of the Alliance Agreement, and thereafter, an amount per share as determined in accordance with Clause (i)(B), and (B) $54.5508 for each Loral 6% Convertible Redeemable Preferred Share or any group of Loral securities (including, subject to Clause (i)(A), any Loral Common Stock) into which such Share was converted or for which it was exchanged (the Share or such group of Loral securities the "Convertible Preferred Security"); (ii) with respect to Alcatel, (A) $15.5625 for each share of Loral Common Stock until an aggregate of 4,205,622 shares of such stock have been sold or otherwise disposed of by Alcatel as described in Section 8.1(a)(ii) of the Alliance Agreement, and thereafter, an amount per share as determined in accordance with Clause (ii)(B), and (B) $51.0498 for each Convertible Preferred Security, and (iii) with respect to Finmeccanica, $50.6563 for each Convertible Preferred Security. The foregoing dollar figures will be adjusted appropriately to reflect the effect of conversions, exchanges, splits, combinations, stock dividends, capital distributions and similar capital adjustments. Hypothetical examples illustrating the intended operation of Section 8.1(a)(ii) of the Alliance Agreement are contained in Exhibit M attached hereto. 3. REPRESENTATIONS AND WARRANTIES 3.1. Representations and Warranties of Loral. Loral represents and warrants to each of the Stockholders as follows: 3.1.1. Loral Organization; Capitalization. Loral is a company duly organized, validly existing and in good standing under the laws of the Islands of Bermuda and has all requisite corporate power and authority to own its properties and assets and to conduct its 3 5 business as now conducted. The authorized capital stock of Loral consists of (a) 750,000,000 shares of Common Stock, par value $.01 per share, of which 191,168,755 shares are issued and outstanding and, without giving effect to the transactions contemplated hereby, 97,533,912 additional shares are reserved for issuance upon the exercise or conversion of outstanding options, warrants or convertible securities; (b) 150,000,000 shares of Series A Non-Voting Convertible Preferred Stock, par value $.01 per share, of which 45,896,977 shares are outstanding and none of which have been reserved for issuance; (c) 750,000 shares of Series B Preferred Stock, par value $.01 per share, no shares of which are outstanding, and 250,000 shares of which have been reserved for issuance upon the exercise of outstanding rights; and (d) 20,000,000 shares of LSC Series C Preferred Shares, of which 13,845,774 shares are outstanding, and none of which are reserved for issuance. 3.1.2. Authorization and Validity of Agreement. Loral has the corporate power to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the performance of Loral's obligations hereunder have been, or will have been on the Closing Date, duly authorized by the Board of Directors of Loral, and no other corporate proceedings on the part of Loral are necessary to authorize such execution, delivery and performance. This Agreement has been duly executed by Loral and is the legal, valid and binding obligation of Loral. 3.1.3. No Conflict or Violation. The execution, delivery and performance by Loral of this Agreement do not and will not violate or conflict with any provision of the charter documents or bye-laws of Loral, and do not and will not violate any provision of any agreement or instrument to which Loral is a party or by which it is bound, or any order, judgment or decree of any court or other governmental or regulatory authority to which Loral is subject. 3.1.4. Validity of Securities. The shares of LSC Stock and LSC Preferred Stock have been, or will have been as of the Closing Date, duly authorized for issuance and sale to Aerospatiale and Alcatel pursuant to this Agreement, and when duly executed and delivered against payment therefor as provided herein, will be validly issued, fully paid and non-assessable; the stock certificates evidencing the LSC Stock and LSC Preferred Stock will be in due and proper form and comply with all applicable legal requirements; the issuance of the LSC Stock and LSC Preferred Stock will not be subject to any call, preemptive or other similar rights. 4 6 3.1.5.Repurchase of SS/L Shares from DASA and Finmeccanica. (a) On March 25, 1997, pursuant to the DASA Agreement, Holdings acquired DASA's right, title and interest in and to SS/L Shares for $93.5 million in cash. The DASA Agreement, a complete and accurate copy of which is attached hereto as Exhibit C, is in full force and effect, without amendment or breach by any party; Loral has not provided, and is not obligated to provide, CPEOs or other consideration to DASA having an aggregate value of more than $93.5 million, and Loral has made no purchases, or agreements, understandings or letters of intent, creating or leading to an obligation to pay "additional consideration" under the DASA Agreement. (b) On March 31, 1997, pursuant to the Finmeccanica Agreement, Loral acquired Finmeccanica's right, title and interest in and to SS/L Shares in exchange for $92.3 million aggregate principal amount of CPEOs having a market value of $93.5 million. The Finmeccanica Agreement, a complete and accurate copy of which is attached hereto as Exhibit D, is in full force and effect, without amendment or breach by any party; Loral has not provided, and is not obligated to provide, CPEOs or other consideration to Finmeccanica having an aggregate value of more than $93.5 million, and Loral has made no purchases or agreements, understandings or letters of intent, creating or leading to an obligation to pay "additional consideration" under the Finmeccanica Agreement. In addition, Finmeccanica has not been granted, and does not have, any rights or benefits with respect to SS/L that have not been, or at Closing will not be, granted on an equal basis to the Stockholders. (c) All periods during which "additional consideration" is to be measured or calculated under the DASA Agreement, Finmeccanica Agreement, and that certain Agreement, dated August 9, 1996, by and among Loral, Holdings (as defined herein), Lehman Brothers Capital Partners II, L.P., Lehman Brothers Merchant Banking Portfolio Partnership L.P., Lehman Brothers Offshore Investment Partnership L.P. and Lehman Brothers Offshore Investment Partnership-Japan L.P., have expired. 3.1.6.LSC Corp. Matters. (a) LSC Corp. Organization; Ownership. Loral Space & Communications Corporation ("LSC Corp.") is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted. Loral owns, and will own as of the Closing Date, all the outstanding shares of capital stock (having any voting power) of LSC Corp. (b) Authorization and Validity of Closing Agreements. LSC Corp. has the corporate power to enter into each of the agreements and the amendment, as applicable, referred to in Section 4.1.1.(e) (collectively the "Closing Agreements") and to carry out its obligations thereunder. The execution and delivery of the Closing Agreements and the performance of LSC Corp.'s obligations thereunder have been, or will have been on the Closing Date, duly authorized by the Board of Directors of LSC Corp., and no other corporate 5 7 proceedings on the part of LSC Corp. are necessary to authorize such execution, delivery and performance. (c) No Conflict or Violation. The execution, delivery and performance by LSC Corp. of the Closing Agreements do not and will not violate or conflict with any provision of the charter documents or by-laws of LSC Corp., and do not and will not violate any provision of any agreement or instrument to which LSC Corp. is a party or by which it is bound, or any order, judgment or decree of any court or other governmental or regulatory authority to which LSC Corp. is subject. 3.1.7. Holdings Matters. (a) Holdings Organization; Ownership. Loral SpaceCom Corporation ("Holdings") is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted. LSC Corp. owns, and will own as of the Closing Date, all the outstanding shares of capital stock (having any voting power) of Holdings. (b) Authorization and Validity of Closing Agreements. Holdings has the corporate power to enter into, as applicable, each of the Closing Agreements and to carry out its obligations thereunder. The execution and delivery of the Closing Agreements and the performance of Holdings' obligations thereunder have been, or will have been on the Closing Date, duly authorized by the Board of Directors of Holdings, and no other corporate proceedings on the part of Holdings are necessary to authorize such execution, delivery and performance. (c) No Conflict or Violation. The execution, delivery and performance by Holdings of the Closing Agreements do not and will not violate or conflict with any provision of the charter documents or by-laws of Holdings, and do not and will not violate any provision of any agreement or instrument to which Holdings is a party or by which it is bound, or any order, judgment or decree of any court or other governmental or regulatory authority to which Holdings is subject. 6 8 3.1.8. SS/L Matters. (a) SS/L Organization; Capitalization. SS/L is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted. The authorized capital stock of SS/L consists of 100,000 SS/L Shares and 100,000 shares of preferred stock, par value $.10 per share, of which 4,000 SS/L Shares are issued and outstanding and no SS/L Shares are reserved for issuance upon the exercise or conversion of outstanding options, warrants or convertible securities. Without giving effect to the transactions contemplated hereby, 3,020 SS/L Shares are held by Holdings, and 490 SS/L Shares are held by each of Aerospatiale and Alcatel. There are no outstanding options, warrants, agreements or rights (including contingent rights) for any person to acquire any SS/L Shares or any interest therein. (b) Authorization and Validity of Closing Agreements. SS/L has the corporate power to enter into each of the Closing Agreements and to carry out its obligations thereunder. The execution and delivery of the Closing Agreements and the performance of SS/L's obligations thereunder have been, or will have been on the Closing Date, duly authorized by the Board of Directors of SS/L, and no other corporate proceedings on the part of SS/L are necessary to authorize such execution, delivery and performance. (c) No Conflict or Violation. The execution, delivery and performance by SS/L of the Closing Agreements do not and will not violate or conflict with any provision of the Certificate of Incorporation or By-Laws of SS/L, and do not and will not violate any provision of any agreement or instrument to which SS/L is a party or by which it is bound, or any order, judgment or decree of any court or other governmental or regulatory authority to which SS/L is subject. 3.1.9. Registration and Resale of LSC Common Stock and LSC Series C Preferred Shares. The shares of LSC Common Stock and LSC Series C Preferred Shares issued hereunder, and, when issued, the shares of LSC Common Stock issuable upon conversion of the LSC Series C Preferred Shares issued hereunder, all have been duly registered under the U.S. Securities Act of 1933, as amended (pursuant to Securities Act Registration Number 333-26517, on Form S-3), and applicable state securities laws (collectively the "Securities Laws") and admitted for trading on the New York Stock Exchange. Other than restrictions imposed by the Securities Laws, the shares of LSC Common Stock issued hereunder, the shares of LSC Series C Preferred Shares issued hereunder, and, when issued, the shares of LSC Common Stock issuable upon conversion of the LSC Series C Preferred Shares, are not subject to any legal or contractual restrictions on resale other than as may be set forth in the Alliance Agreement in the form attached hereto as Exhibit F. 3.2. Representations and Warranties of Aerospatiale. Aerospatiale represents and warrants to Loral as follows: 3.2.1. Organization. Aerospatiale is a societe nationale industrielle duly organized, validly existing and in good standing under the laws of the Republic of France, and 7 9 has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted. 3.2.2. Authorization and Validity of Agreement. Aerospatiale has the corporate power to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the performance of Aerospatiale's obligations hereunder have been, or will have been on the Closing Date, duly authorized by the appropriate governing body of Aerospatiale, and no other corporate proceedings on the part of Aerospatiale are necessary to authorize such execution, delivery and performance. This Agreement has been duly executed by Aerospatiale and is the legal, valid and binding obligation of Aerospatiale. 3.2.3. No Conflict or Violation. The execution, delivery and performance by Aerospatiale of this Agreement do not and will not violate or conflict with any provision of the charter documents or by-laws (or corresponding instruments under the laws of France) of Aerospatiale, and do not and will not violate any provision of any agreement or instrument to which Aerospatiale is a party or by which it is bound, or any order, judgment or decree of any court or other governmental or regulatory authority to which Aerospatiale is subject. 3.2.4. Title to SS/L Shares. Aerospatiale holds good and valid title to the Aerospatiale SS/L Shares, which shares are owned by Aerospatiale free and clear of any lien or other right or claim, except to the extent set forth in the Stockholders Agreement, dated as of April 22, 1991, by and among SS/L, the Stockholders, Finmeccanica (through its predecessor in interest), Loral Corporation, a New York corporation ("Old Loral"), and Loral Aerospace Holdings, Inc., a Delaware corporation ("Old Holdings"), as amended by Amendment No. 1 to Stockholders Agreement, dated as of November 10, 1992, by and among the parties to the aforementioned Stockholders Agreement, DASA and Loral Aerospace Corporation, a Delaware Corporation ("LAC") (such Stockholders Agreement, as amended by such Amendment No. 1, hereinafter the "Stockholders Agreement"), and when such SS/L Shares are acquired by Loral in accordance with the terms of this Agreement, Loral will acquire good and valid title to such SS/L Shares free of any lien or other right or claim created or suffered by Aerospatiale. 3.2.5. No Brokers or Agents. Aerospatiale has not retained the services of any broker or agent in connection with the Exchange. 3.3. Representations and Warranties of Alcatel. Alcatel represents and warrants to Loral as follows: 3.3.1. Organization. Alcatel is a societe anonyme duly organized, validly existing and in good standing under the laws of the Republic of France, and has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted. 3.3.2. Authorization and Validity of Agreement. Alcatel has the corporate power to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the performance of Alcatel's obligations hereunder have been, or will have been on the Closing Date, duly authorized by the appropriate governing body of 8 10 Alcatel, and no other corporate proceedings on the part of Alcatel are necessary to authorize such execution, delivery and performance. This Agreement has been duly executed by Alcatel and is the legal, valid and binding obligation of Alcatel. 3.3.3. No Conflict or Violation. The execution, delivery and performance by Alcatel of this Agreement do not and will not violate or conflict with any provision of the charter documents or by-laws (or corresponding instruments under the laws of France) of Alcatel, and do not and will not violate any provision of any agreement or instrument to which Alcatel is a party or by which it is bound, or any order, judgment or decree of any court or other governmental or regulatory authority to which Alcatel is subject. 3.3.4. Title to SS/L Shares. Alcatel holds good and valid title to the Alcatel SS/L Shares, which shares are owned by Alcatel free and clear of any lien or other right or claim, except to the extent set forth in the Stockholders Agreement, and when such SS/L Shares are acquired by Loral in accordance with the terms of this Agreement, Loral will acquire good and valid title to such SS/L Shares free of any lien or other right or claim created or suffered by Alcatel. 3.3.5. No Brokers or Agents. Alcatel has not retained the services of any broker or agent in connection with the Exchange. 4. CONDITIONS TO CLOSING 4.1. Conditions to the Closing. 4.1.1. Conditions to Obligations of Each of the Stockholders. The obligations of each Stockholder to consummate the Exchange are subject to the satisfaction or waiver, at or prior to the Closing Date, of the following conditions: (a) the representations and warranties of Loral contained herein shall be true and correct in all material respects on and as of the Closing Date as if made on and as of such date; (b) Loral shall have performed and complied in all material respects with all agreements required by this Agreement to be performed or complied with by it on or prior to the Closing Date; (c) such Stockholder shall have received a certificate signed by an executive officer of Loral to the effect that the conditions set forth in paragraphs (a) and (b) above have been satisfied; (d) such Stockholder shall have received an opinion, dated the Closing Date, from Appleby, Spurling & Kempe as to due formation of Loral and the legality of the LSC Common Stock and LSC Series C Preferred Shares issued to such Stockholder; 9 11 (e) Loral and, as applicable, LSC Corp., Holdings, and the other parties thereto (other than such Stockholder) shall have executed and delivered to such Stockholder, the Series C Reg Rights Agreement, attached hereto as Exhibit B, the Registration Rights Agreement in the form of Exhibit E attached hereto, the Alliance Agreement in the form of Exhibit F attached hereto, and the Amendment No. 2 to Operational Agreement (amending the Operational Agreement dated April 22, 1991 as amended by Amendment No. 1, dated November 10, 1992 (the "Operational Agreement")) in the form of Exhibit G attached hereto; (f) the By-Laws of SS/L shall have been amended and restated by the adoption of the resolutions in the form of Exhibit J attached hereto, and such Stockholder shall have received a certificate, dated the Closing Date, from the Secretary of SS/L attesting to and attaching true and complete copies of the SS/L Certificate of Incorporation and By-Laws; and (g) The Series C Schedule attached hereto as Exhibit A shall be in full force and effect. 4.1.2. Conditions to Obligations of Loral. The obligations of Loral to consummate the Exchange are subject to the satisfaction or waiver, at or prior to the Closing Date, of the following conditions: (a) the representations and warranties of each Stockholder contained herein shall be true and correct in all material respects on and as of the Closing Date as if made on and as of such date; (b) each Stockholder shall have performed and complied in all material respects with all agreements required by this Agreement to be performed or complied with by it on or prior to the Closing Date; (c) Loral shall have received from each Stockholder a certificate signed by an executive officer of such Stockholder to the effect that the conditions set forth in paragraphs (a) and (b) above have been satisfied; and (d) each Stockholder shall have executed and delivered (i) to Loral the Series C Reg Rights Agreement attached hereto as Exhibit B, and (ii) to Loral and, as applicable, LSC Corp., Holdings, and the other parties thereto (other than such Stockholder) the Registration Rights Agreement in the form of Exhibit E attached hereto, the Alliance Agreement in the form of Exhibit F attached hereto, and the Amendment No. 2 to Operational Agreement in the form of Exhibit G attached hereto. 4.1.3. Conditions to Obligations of Loral and Each of the Stockholders. The obligations of Loral and each of the Stockholders to consummate the Exchange are subject to the satisfaction or waiver at or prior to the Closing Date, of the following conditions: (a) The Defense Investigative Service of the United States Department of Defense ("DoD") shall have countersigned and returned the letter dated June 17, 1997, from counsel for Loral, in the form of Exhibit K attached hereto; and 10 12 (b) Finmeccanica shall have executed and delivered to Loral and each of the Stockholders the Alliance Agreement in the form of Exhibit F hereto, and the Amendment No. 2 to Operational Agreement in the form of Exhibit G attached hereto. 5. TERMINATION 5.1. Termination. If Closing has not been completed on or before July 31, 1997 for any reason, any Stockholder that did not default in its obligations hereunder may terminate this Agreement without penalty. 5.2. Restated Stockholders Agreement. Upon termination pursuant to Section 5.1. and demand by a Stockholder that did not default in its obligations under this Agreement, the parties hereto promptly shall execute and deliver the Restated Stockholders Agreement in the form attached hereto as Exhibit L for the purposes of implementing among themselves the Term Sheet, dated as of July 2, 1996, by and among SS/L, Loral, the Stockholders, DASA and Finmeccanica. The provisions of this Section 5.2. shall survive any termination of this Agreement. 6. MISCELLANEOUS 6.1. United States Department of Defense. 6.1.1. Loral, SS/L and each Stockholder shall, and each shall use its reasonable best efforts to cause DoD to, execute and deliver as soon as reasonably possible the Security Control Agreement in the form of Exhibit H attached hereto and the Visitation Procedures Agreement in the form of Exhibit I attached hereto, and, to that end, each Stockholder shall consider in good faith any changes that DoD may propose to those agreements. Each Stockholder agrees not to reject any modification to either or both of the aforesaid agreements proposed by DoD unless such modification would adversely affect the rights of such Stockholder under the Alliance Agreement (including the Schedules and Attachments thereto) or the Operational Agreement (including the Schedules and Attachments thereto). Each Stockholder hereby confirms that it is not its intention or desire to exercise the rights it may have pursuant to Section 6.1.2. 6.1.2. If the parties hereto have consummated the Exchange and the DoD has not executed, on or prior to December 31, 1997 (i) the Security Control Agreement in the form of Exhibit H attached hereto (as it may be modified in accordance with Section 6.1.1.) and the Visitation Procedures Agreement in the form of Exhibit I attached hereto (as it may be modified in accordance with Section 6.1.1.), then each Stockholder shall have the right ("Swap Back Option") to transfer to Loral all, but not less than all, of the LSC Common Stock and LSC Series C Preferred Shares issued to such Stockholder in the Exchange in exchange for SS/L Shares representing 12.25% of the total number of SS/L Shares issued and outstanding. A Stockholder may elect to exercise the Swap Back Option by delivery of a notice to Loral by January 23, 1998. The closing date of the transactions contemplated by exercise of Swap Back Options shall occur on the later of (A) February 6, 1998 and (B) the expiration of all regulatory holding periods 11 13 (including waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the obtaining of all governmental approvals, if any, applicable to such transactions (including, with respect to Aerospatiale, the approval of the French Ministry of Defense ("MOD") required pursuant to Decret No.53-707 of 9 August 1953, modified by Decret No. 78-173 of 16 February 1978 (such approval, the "MOD Approval")). Upon closing of the transactions contemplated by exercise of Swap Back Options, each Stockholder participating in the Swap Back Option, Loral, LSC Corp., Holdings, and all stockholders of SS/L not included among the foregoing parties shall thereupon become parties to the Restated Stockholders Agreement in the form of Exhibit L attached hereto. 6.2. French Ministry of Defense 6.2.1. Aerospatiale shall promptly apply for, and use its reasonable best efforts to obtain, as soon as possible, MOD Approval for Aerospatiale's investment in Loral in accordance with this Agreement. Aerospatiale promptly shall provide Loral copies of all correspondence to and from the MOD in connection with this application, and shall keep Loral informed of relevant developments. 6.2.2. If on or prior to December 31, 1997 (or such later date prior to June 30, 1998, as Loral may designate by notice to the Stockholders), the MOD shall have rejected in writing, or otherwise have failed to approve, Aerospatiale's investment pursuant to this Agreement, Aerospatiale shall have the right ("MOD Option") to transfer to Loral all, but not less than all, of the LSC Common Stock and LSC Series C Preferred Shares issued to Aerospatiale in the Exchange, in return for SS/L Shares representing 12.25% of the total number of SS/L shares issued and outstanding. The MOD Option would be exercisable by Aerospatiale by delivery of a notice to Loral by no later than January 23, 1998. The closing date of the transactions contemplated by exercise of the MOD Option shall occur on the later of (A) two weeks after delivery of the aforesaid notice to Loral, and (B) the expiration of all regulatory holding periods (including waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the obtaining of all governmental approvals, if any, applicable to such transactions. 6.2.3. Upon consummation of the transactions contemplated by exercise of the MOD Option, Aerospatiale, Loral, LSC Corp., Holdings, and all stockholders of SS/L not included among the foregoing parties shall thereupon execute and deliver, and become parties to, the Restated Stockholders Agreement in the form of Exhibit L attached hereto. In addition, Aerospatiale and Loral shall execute and deliver any waivers, consents or other agreements as may be reasonably requested to prevent the rights of Aerospatiale under the aforesaid agreements from conflicting with or limiting the rights of the other Strategic Participants under the Alliance Agreement and Operational Agreement. 12 14 6.3. Consents and Waivers by Stockholders. 6.3.1. Effective upon the Closing, each of the Stockholders hereby (a) consents to the Loral/Lockheed Martin Transaction (as defined below) in so far as such transaction, together with subsequent transactions completed by Loral, LSC Corp., and Holdings prior to the date hereof, relate to the rights and obligations between Loral and LSC Corp. (as successors in interest to Old Loral) and Holdings (as successor in interest to Old Holdings and LAC), on the one hand, and the Stockholders, on the other hand, under the Stockholders Agreement and other agreements with respect to SS/L and (b) waives any and all put or call rights it may have in connection with the Loral/Lockheed Martin Transaction. 6.3.2. The "Loral/Lockheed Martin Transaction" shall mean the following actions taken pursuant to a Restructuring, Financing and Distribution Agreement, dated as of January 7, 1996, by and among certain parties including Old Loral, Old Holdings, LAC, and Lockheed Martin Corporation, a Maryland corporation ("Lockheed Martin"), on or before April 23, 1996, collectively: (i) LAC acted to assign and transfer to Old Holdings all of LAC's right, title and interest in and to SS/L Shares and all of its rights and obligations under and with respect to the Stockholders Agreement and certain other agreements relating to SS/L; (ii) Old Holdings acted to assign and transfer to Old Loral all of Old Holdings' right, title and interest in and to SS/L Shares (including those received from LAC) and all of its rights and obligations under and with respect to the Stockholders Agreement and certain other agreements relating to SS/L (including those received from LAC); (iii) Old Loral acted to transfer all such rights, titles, interests and obligations to Loral; (iv) Loral acted through a series of transactions to transfer to Holdings all rights, titles, interests and obligations Loral received from Old Holdings, including the SS/L Shares and the rights and obligations of Old Holdings and LAC under and with respect to the Stockholders Agreement and certain other agreements relating to SS/L; (v) Old Loral distributed as a dividend to its stockholders 80% of the capital stock of Loral; (vi) Lockheed Martin acquired 20% of the capital stock of Loral; and (vii) Lockheed Martin acquired Old Loral through merger with and into a wholly owned subsidiary corporation of Lockheed Martin. 6.4. Effectiveness of the Stockholders Agreement. The Stockholders Agreement remains in full force and effect with respect to the respective rights and obligations between SS/L, Loral and LSC Corp. (Loral and LSC Corp. as successors in interest to Old Loral) and Holdings (as successor in interest to Old Holdings and LAC), on the one hand, and the Stockholders, on the other hand, prior to and through Closing. Upon completion of Closing, the Stockholders Agreement shall terminate with respect to the Stockholders. Nothing hereunder shall constitute a termination or release by a Stockholder of the continuing obligations that: (i) the other parties to the Stockholders Agreement have following termination of the Stockholders Agreement, or (ii) DASA has following the termination of the Operational Agreement with respect to DASA; the Stockholders hereby reserve their respective rights with respect to such continuing obligations. 6.5. Several Rights and Obligations. The respective rights and obligations of the Stockholders hereunder are several, not joint. 13 15 6.6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the doctrine of conflicts of laws. 6.7. No Waivers; Amendments. 6.7.1. No failure or delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 6.7.2. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by each party hereto. 6.8. Survival of Provisions. The representations and warranties, covenants and agreements contained in this Agreement shall survive and remain in full force and effect, regardless of any investigation made by or on behalf of any of the Stockholders, or by or on behalf of Loral, and shall survive delivery of the LSC Stock, LSC Preferred Stock, Aerospatiale SS/L Shares and Alcatel SS/L Shares. 6.9. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties hereto and supersedes any and all prior agreements and understandings, written or oral, relating to the subject matter hereof. 6.10. Counterparts. This Agreement may be signed in counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument. 6.11. Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 6.12. Press Releases and Public Announcements. Any press releases and public announcements or disclosures relating to the transactions contemplated hereby shall be made only if mutually agreed upon by the parties hereto, except to the extent a party has been advised in writing by counsel (with a copy provided to the other parties) that failure to disclose would violate applicable law or stock exchange regulation, provided that any such required disclosure will, to the extent practicable, be subject to prior consultation among the parties. 6.13. Expenses. Except as otherwise set forth in this Agreement, each party to this Agreement shall bear all the fees, costs and expenses that are incurred by it in connection with the transactions contemplated hereby, including, without limitation, attorneys' fees and fees of financial advisors and investment bankers engaged by such party. 14 16 IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement as of the date first set forth above. LORAL SPACE & COMMUNICATIONS LTD. By: /s/ Michael B. Targoff ---------------------------------------------- Name: Michael B. Targoff Title: President and Chief Operating Officer AEROSPATIALE SNI By: /s/ Michel Delaye ---------------------------------------------- Name: Michel Delaye Title: Le Directeur, Aerospatiale Espace & Defense ALCATEL ESPACE By: /s/ JC Husson ---------------------------------------------- Name: Jean Claude Husson Title: President and CEO 15 EX-10.2 3 ALLIANCE AGREEMENT 1 Exhibit 10.2 ALLIANCE AGREEMENT ALLIANCE AGREEMENT ("Agreement"), dated as of June 23, 1997, by and among LORAL SPACE & COMMUNICATIONS LTD., a Bermuda company ("Loral"), LORAL SPACE & COMMUNICATIONS CORPORATION, a Delaware corporation ("LSC Corp."), LORAL SPACECOM CORPORATION, a Delaware corporation ("Holdings") (Loral, LSC Corp. and Holdings sometimes referred to herein collectively as the "Loral Entities"), SPACE SYSTEMS/LORAL, INC., a Delaware corporation ("SS/L"), AEROSPATIALE SNI, a societe nationale industrielle organized under the laws of France ("Aerospatiale"), ALCATEL ESPACE, a societe anonyme organized under the laws of France ("Alcatel"), and FINMECCANICA S.p.A., a societe par azione organized under the laws of Italy ("Finmeccanica") (Aerospatiale, Alcatel and Finmeccanica collectively the "Strategic Participants"). W I T N E S S E T H: WHEREAS, SS/L, Aerospatiale, Alcatel, Finmeccanica (through its predecessor in interest), Loral Corporation, a New York corporation ("Old Loral"), and Loral Aerospace Holdings, Inc., a Delaware corporation ("Old Holdings"), executed a certain Stockholders Agreement dated as of April 22, 1991, involving, inter alia, shares of common stock, par value $.10 per share, of SS/L ("Common Stock") (the shares of Common Stock at any time issued by SS/L and any successor thereto being referred to as the "SS/L Shares"); and WHEREAS, the aforementioned parties to the Stockholders Agreement dated April 22, 1991 and Deutsche Aerospace AG, a corporation organized under the laws of Germany ("DASA"), and Loral Aerospace Corp., a Delaware corporation ("LAC"), executed Amendment No. 1 to Stockholders Agreement, dated as of November 10, 1992 (such Stockholders Agreement as amended by such Amendment No. 1, hereinafter the "Stockholders Agreement"); and WHEREAS, pursuant to a certain Restructuring, Financing and Distribution Agreement, dated as of January 7, 1996, by and among certain parties including Old Loral, Old Holdings, LAC, and Lockheed Martin Corporation, a Maryland corporation ("Lockheed Martin"), on or before April 23, 1996: (i) LAC acted to assign and transfer to Old Holdings all of LAC's right, title and interest in and to SS/L Shares and all of its rights and obligations under and with respect to the Stockholders Agreement and certain other agreements relating to SS/L; (ii) Old Holdings acted to assign and transfer to Old Loral all of Old Holdings' right, title and interest in and to SS/L Shares (including those received from LAC) and all of its rights and obligations under and with respect to the Stockholders Agreement and certain other agreements relating to SS/L (including those received from LAC); (iii) Old Loral acted to transfer all such rights, titles, interests and obligations to Loral; (iv) Loral acted through a series of transactions to transfer to Holdings all rights, titles, interests and obligations Loral received from Old Holdings, including the SS/L Shares and the rights and obligations of Old Holdings and LAC under and with respect to the Stockholders Agreement and certain other agreements relating to SS/L; (v) Old Loral distributed as a dividend to its stockholders 80% of the capital stock of Loral; (vi) Lockheed Martin acquired 20% of the capital stock of Loral; and (vii) Lockheed Martin acquired 1 2 Old Loral through merger with and into a wholly owned subsidiary corporation of Lockheed Martin (all such events collectively the "Loral/Lockheed Martin Transaction"); and WHEREAS, the parties hereto, together with DASA, are parties to a certain Term Sheet dated as of July 2, 1996 (the "1996 Term Sheet") setting forth certain statements relating to their respective rights and obligations under the Stockholders Agreement and other agreements with respect to SS/L; and WHEREAS, DASA has assigned and transferred to Holdings all of its SS/L Shares; and WHEREAS, Finmeccanica has assigned and transferred to Loral all of its SS/L Shares pursuant to a "Transaction Agreement," dated March 20, 1997, by and between Loral and Finmeccanica (the "Transaction Agreement"); and WHEREAS, Aerospatiale and Alcatel have exchanged their SS/L Shares for consideration from Loral, pursuant to an "Exchange Agreement," dated June 18, 1997, by and among Loral, Aerospatiale and Alcatel (the "Exchange Agreement"); and WHEREAS, after giving effect to the aforementioned transactions and as of the date hereof, Loral and Holdings own all outstanding SS/L Shares; and WHEREAS, in light of the foregoing and their continued common interest in the operation of SS/L and in order to maintain and extend their strategic cooperation with respect thereto, the parties hereto desire to modify their respective rights and obligations by entering into this Alliance Agreement which shall replace the Stockholders Agreement, and by executing this day Amendment No. 2 to the Operational Agreement, dated this date, amending the Operational Agreement, dated April 22, 1991, by and among SS/L, Loral and LSC Corp. (as successors in interest to Old Loral), Holdings (as successor in interest to Old Holdings) and the Strategic Participants, as amended by Amendment No. 1, dated as of November 10, 1992 (such Operational Agreement as so amended the "Operational Agreement"); and WHEREAS, the parties contemplate entering into a "Security Control Agreement" and "Visitation Procedures Agreement" with the United States Department of Defense. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1 Definitions. As used in this Agreement, the following terms have the following meanings: 2 3 "Aerospatiale" shall have the meaning set forth in the Preamble. "Affected Permitted Transferee" of any Person shall mean (i) a Transferee who, at the time any SS/L Shares were Transferred to it, was a Permitted Transferee of such Person and who thereafter ceased to be a Permitted Transferee of such Person, and also shall mean (ii) a Transferee who has acquired any SS/L Shares through a chain of Transfers, each of which was made to a transferor's Permitted Transferee, through which SS/L Shares have moved from such Person to that Transferee. "Affected SP" shall have the meaning set forth in Section 6.1(b). "Affiliate", as applied to any Person, shall mean any other Person directly or indirectly Controlling, Controlled by, or under common Control with, that Person. "Agreement" shall have the meaning set forth in the Preamble. "Alcatel" shall have the meaning set forth in the Preamble. "Alliance Policy" shall have the meaning set forth in Section 6.3(a). "Annual Budgets" shall mean the annual budgets that the Loral Entities cause SS/L management to develop in order to implement the Strategic Plan. "Blocked Matter" shall have the meaning set forth in Section 3.3. "Business Day" shall mean each day other than Saturdays, Sundays and days when commercial banks are authorized to be closed for business in New York, New York. "Business Opportunity" shall have the meaning set forth in Section 2.2. "Cause" shall have the meaning set forth in Section 3.1(c). "Change of Control" with respect to a party hereto shall mean the occurrence of one or more of the following events after the date hereof: (i) a Person or group (as that term is used in Section l3(d)(3) of the Exchange Act) of Persons that does not Control such party as of the date hereof (or is not Controlled by a Person that Controls such party as of the date hereof) shall have become the beneficial owner or have control over the voting of securities of such party (or any Permitted Transferee which has acquired SS/L Shares from a Loral Entity pursuant to the terms of this Agreement), representing a majority of the combined voting power of the outstanding securities of such party (or such Permitted Transferee), ordinarily having the right to vote in the election of directors, or (ii) directors representing a Person or group (as so defined) of Persons that does not Control such party as of the date hereof (or is not Controlled by a Person that Controls such party as of the date hereof) shall constitute a majority of the Board of Directors of such party (or such Permitted Transferee), or (iii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of such party (or such Permitted Transferee), to any Person or group (as so defined) of Persons that does not Control such party as of the date hereof (or is not Controlled by a Person 3 4 that Controls such party as of the date hereof), or (iv) the shareholders of such party (or such Permitted Transferee), shall approve any plan or proposal for the liquidation or dissolution of such party (or such Permitted Transferee); provided that a Privatization or Public Offering of shares of a Strategic Participant or its direct or indirect parent company shall not constitute a Change of Control of such Strategic Participant. "Change of Control Notice" shall have the meaning set forth in Section 5.3(b). "Change of Control Transfer" shall have the meaning set forth in Section 5.3(a). "Charter Documents" shall mean the Certificate of Incorporation and By-laws of SS/L attached hereto as Schedules 7.1(a)(i) and 7.1(a)(ii), respectively. "Classified Information" shall have the meaning set forth in Section 6.2(b). "Combined" shall have the meaning set forth in Section 2.2(a). "Common Stock" shall have the meaning set forth in the first Recital. "Control" shall mean (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person whether through the ownership of voting securities, by contract or otherwise, including such power being obtained through one or more steps in connection with a corporate restructuring. "Convertible Preferred Security" shall have the meaning set forth in the definition of the term "Nominal Value" herein. "DASA" shall have the meaning set forth in the second Recital. "Direct Exchange" shall have the meaning set forth in Section 5.4(a). "DoD" shall mean the United States Department of Defense. "Election Notice" shall have the meaning set forth in Section 5.4(b). "Exchange Act" shall mean the United States Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. "Exchange Agreement" shall have the meaning set forth in the seventh Recital. "Exchange Closing Date" shall have the meaning set forth in Section 5.4(h). "Exchange Notice" shall have the meaning set forth in Section 5.4(b). "Exchange Option" shall have the meaning set forth in Section 5.4(a). 4 5 "Fair Market Value" shall mean the per share fair market value of SS/L's Common Stock based on a valuation of SS/L and its Subsidiaries as if SS/L and its Subsidiaries were to be sold in their entirety to a purchaser to whom SS/L has long term strategic value with a reasonable amount of time to negotiate and consummate such sale. "Finmeccanica" shall have the meaning set forth in the Preamble. "Floor Reimbursement Amount" shall have the meaning set forth in Section 3.3(c). "FOCI" shall have the meaning set forth in Section 6.1(a). "Holdings" shall have the meaning set forth in the Preamble. "Holdings Nominees" shall have the meaning set forth in Section 3.1(a). "ICC" shall have the meaning set forth in Section 9.1(a). "Indirect Exchange" shall have the meaning set forth in Section 5.4(a). "LAC" shall have the meaning set forth in the second Recital. "Lockheed Martin" shall mean Lockheed Martin Corporation, a Maryland corporation, and each of its Subsidiaries and Affiliates. "Loral" shall have the meaning set forth in the Preamble. "Loral Change of Control" shall have the meaning set forth in Section 5.3(a). "Loral Common Stock" shall mean Common Stock, par value $.01 per share, of Loral. "Loral Entities" shall have the meaning set forth in the Preamble. "Loral Exchange Agreement Securities" shall mean the Loral securities which Aerospatiale or Alcatel each received pursuant to the Exchange Agreement and Finmeccanica received pursuant to the Transaction Agreement, any Loral securities into which the foregoing Loral securities are converted or for which they are exchanged, and any Loral securities resulting from or received with respect to the foregoing securities as a result of any capital splits, combinations, stock dividends, capital distributions or similar capital adjustments. Any Loral securities that a Strategic Participant may hold which are of the same class or series as, and are in addition to, Loral Exchange Agreement Securities shall not be "Loral Exchange Agreement Securities." "Loral Qualified Affiliate" shall mean an Affiliate of Loral in which none of the minority investors who, individually, own more than 20% of such Affiliate, provide products or services that substantially compete with products or services provided by a Strategic Participant. 5 6 "Loral/Lockheed Martin Transaction" shall have the meaning set forth in the third Recital. "LSC Corp." shall have the meaning set forth in the Preamble. "Management Liaison Committee" shall have the meaning set forth in Section 4.2. "MOD" shall mean the French Ministry of Defense. "MOD Approval" shall have the meaning set forth in Section 5.3(k). "1996 Term Sheet" shall have the meaning set forth in the fourth Recital. "Net Proceeds" shall have the meaning set forth in Section 5.4(d). "Nominal Value" shall have the meaning given to it in the Exchange Agreement. The Nominal Value for each Convertible Preferred Security, with respect to Finmeccanica, shall be $50.6563, which Nominal Value shall not be amended without the consent of Finmeccanica. "Notices" shall have the meaning set forth in Section 9.7. "NYSE" shall mean the New York Stock Exchange. "Offer Price" shall have the meaning set forth in Section 5.3(c). "Old Holdings" shall have the meaning set forth in the first Recital. "Old Loral" shall have the meaning set forth in the first Recital. "Operational Agreement" shall have the meaning set forth in the ninth Recital. "Other Investment Bank" shall have the meaning set forth in Section 5.3(d). "Outstanding SS/L Shares" shall have the meaning set forth in Section 5.3(b). "Participant Investment Bank" shall have the meaning set forth in Section 5.3(d). "Permitted Sale Period" shall have the meaning set forth in Section 5.3(g). "Permitted Transferee" shall mean, in the case of any party hereto, any Subsidiary of which such party holds, directly or indirectly, 80% or more of the voting power, or any corporation of which such party is such an 80% or greater Subsidiary. "Person" shall mean an individual or a corporation, partnership, trust, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. 6 7 "Privatization" shall mean the direct or indirect transfer or sale by instrumentalities of the Republic of France or Republic of Italy through one or more related transactions of equity or voting interests of a Strategic Participant or of a company that directly or indirectly owns or controls a Strategic Participant, in which a Person or group (as that term is used in Section 13(d)(3) of the Exchange Act) of Persons does not acquire Control of such Strategic Participant. "Prorated Excess Value" shall have the meaning set forth in Section 5.4(e). "Public Offering" shall mean, with respect to any Person, any underwritten public offering of equity securities of such Person pursuant to an effective registration statement under the Securities Act or any other applicable law, in which a Person or group (as that term is used in Section 13(d)(3) of the Exchange Act) of Persons does not acquire Control of such Strategic Participant. "Purchase Closing Date" shall have the meaning set forth in Section 5.3(k). "Purchase Notice" shall have the meaning set forth in Section 5.3(e). "Purchase Option" shall have the meaning set forth in Section 5.3(e). "Qualified Third Party" shall mean a Third Party whose status as a stockholder of SS/L would not place SS/L's facility clearance in jeopardy under applicable DoD security rules and regulations as determined by the Defense Investigative Service. "Reimbursement Amount" shall have the meaning set forth in Section 3.3(b). "Remaining Loral Securities" shall mean the Loral Exchange Agreement Securities that a Strategic Participant shall hold at any given time. "Remaining Portion" shall have the meaning set forth in Section 5.4(c). "Restated Stockholders Agreement" shall mean a "Restated Stockholders Agreement" for SS/L, in substantially the form of Schedule I.A.. "Scope of Business" shall have the meaning set forth in Section 2.1. "SEC" shall mean the United States Securities and Exchange Commission. "Second Purchase Notice" shall have the meaning set forth in Section 5.3(e). "Securities Act" shall mean the United States Securities Act of 1933, as amended, and the rules and regulations thereunder. "Securities Laws" shall have the meaning set forth in Section 3.3(a). 7 8 "Security Control Agreement" shall have the meaning set forth in the final Recital. "Sole Dissenter" shall have the meaning set forth in Section 3.3(a). "Space Systems" shall mean all civil, scientific and military satellites, other spacecraft (including, without limitation, satellites with integrated upper stage launchers, space station hardware and planetary mission hardware but excluding other launchers, space planes and manned transfer and manned reentry vehicles), all subsystems thereof, and all other related hardware, software and services (including ground control services and related hardware and software) for space communications, military, surveillance and remote sensing applications, meteorology/environmental, earth observation, scientific research and other space mission applications, but not including telecommunications users' earth stations. "SP Nominee" shall have the meaning set forth in Section 3.1(a). "SP U.S. Assignee" shall mean a Qualified Third Party organized in the United States which is designated by the Strategic Participants to purchase interests which such Strategic Participant is entitled to purchase under Section 5.3 of this Agreement, provided that such Qualified Third Party shall have agreed in writing, effective upon consummation of such purchase, to be bound by this Agreement, and such agreement shall have been delivered and be otherwise reasonably satisfactory for such purpose to Holdings. "SS/L Eligible Programs" shall have the meaning set forth in the Operational Agreement. "SS/L Shares" shall have the meaning set forth in the first Recital. "Stockholders Agreement" shall have the meaning set forth in second Recital. "Strategic Participant" shall mean (i) Aerospatiale, Alcatel and Finmeccanica until such time as such Person's rights as a Strategic Participant terminate pursuant to Section 8.1, and also shall mean (ii) any successor or assignee of a Strategic Participant who shall become a Strategic Participant pursuant to Section 5.3 or 9.5 and until such time as such successor's or assignee's rights as a Strategic Participant terminate pursuant to Section 8.1. "Strategic Plan" shall mean the 1997 Space Systems/Loral Strategic Plan in effect on the date hereof, as it may be amended from time to time pursuant to Section 3.2(b)(ix). "Subsidiary" shall mean, with respect to any Person, any corporation or other entity of which a majority (or such other percentage as may be expressly stated herein) of the capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. 8 9 "Technology" shall mean written and oral information, drawings and documents in which SS/L or the Strategic Participants have rights of ownership, which is directly related to the design, engineering, development, manufacture, test, delivery, use, control, operation or maintenance of Space Systems, or which advances the state of the art of Space Systems, but not including general scientific, mathematical or engineering principles. "Third Party" shall mean any prospective purchaser of SS/L Shares that is not a Permitted Transferee of Loral. "Third Party Transfer" shall have the meaning set forth in Section 5.2(b). "Transaction Agreement" shall have the meaning set forth in the sixth Recital. "Transfer" shall mean any transfer, sale, assignment, pledge, hypothecation, encumbrance or other disposition of ownership of, or Control over, an item or right. "Transferee" shall mean a Person to whom or to which a Transfer is made. All references to "this Agreement," and the words "herein," "hereunder," "hereof," "hereinafter" and words of similar import, when used herein shall mean and refer to this Alliance Agreement, as from time to time amended. ARTICLE II SCOPE OF BUSINESS OF SS/L Section 2.1 Scope of Business. SS/L shall engage in the design, development, manufacture, sale and launch of Space Systems and the operation thereof to the extent such operation occurs in connection with launch services and before turnover of a Space System to a customer. SS/L shall not engage in any business outside the scope of business set forth in the preceding sentence (the "Scope of Business") without the unanimous written consent of the Strategic Participants (except that this prohibition shall not prevent SS/L from purchasing other products or services and reselling them to customers as part of a contract to supply Space Systems). Nothing contained in this Section 2.1 shall be deemed to prohibit SS/L from engaging in ordinary business activities incidental to the conduct of its principal business or from taking any action contemplated by the Strategic Plan, including activities authorized by the Annual Budget of SS/L or any action incidental thereto. Section 2.2 Additional Satellite Businesses. (a) Loral and its Affiliates (other than SS/L) shall not acquire, develop, conduct or pursue any business opportunities within the Scope of Business of SS/L set forth in the first sentence of Section 2.1 (each, a "Business Opportunity"), unless the Business Opportunity is Combined (as defined below) with SS/L. For the purposes of this Section 2.2 a Business Opportunity shall be "Combined" with SS/L if it is both controlled and owned by SS/L, which, by way of example, would include merger into SS/L or acquisition by SS/L, in either case with the result that the interests acquired by Loral or its 9 10 Affiliates through pursuit of such Business Opportunity are owned and controlled by SS/L. Any Business Opportunity Combined with SS/L pursuant to the immediately preceding sentence shall be subject to the direction and control of the SS/L Board of Directors. (b) This Section 2.2 shall not be construed to prohibit, constrain or limit the pursuit or development by Loral or any of its Affiliates of any business with respect to the design, engineering, development, manufacture, test, delivery, use, control, operation, maintenance or sale of any device, instrument, component, machine, program or service that is used or applied generally in the defense or electronics business, notwithstanding the similar use or application of such device, instrument, component, machine or program in any space-related business. Section 2.3 No Limitations on Strategic Participants. Except as expressly set forth herein or in the Operational Agreement, nothing contained herein shall be construed to prohibit, constrain or limit in any way any business activity of any of the Strategic Participants. ARTICLE III GOVERNANCE OF SS/L Section 3.1 SS/L Board of Directors. (a) The number of members of the SS/L Board of Directors shall be equal to the sum of (i) at least four plus (ii) the number of Strategic Participants at any time. Holdings shall be entitled, but not required, to nominate four members (the "Holdings Nominees") to the SS/L Board of Directors. Each Strategic Participant shall be entitled, but not required, to nominate one member (each person so nominated an "SP Nominee") to the SS/L Board of Directors. The SS/L Board of Directors shall meet at least two (2) times in each year. (b)(i) Loral and Holdings shall vote all of their respective SS/L Shares at any regular or special meeting of the stockholders of SS/L called for the purpose of filling positions on the SS/L Board of Directors, or in any written consent executed in lieu of such a meeting of stockholders, and agrees to take all actions otherwise necessary, to ensure the election to the SS/L Board of Directors of each of the SP Nominees as described herein. (ii) SS/L, Loral and Holdings shall call, or cause the appropriate officers and directors of SS/L to call, a special meeting of stockholders of SS/L and to vote all of the SS/L Shares owned or held of record by Loral and Holdings for, or to take all actions by written consent in lieu of any such meeting necessary to cause, the removal (with or without cause) of any SP Nominee if the Strategic Participant that had nominated such SP Nominee requests such director's removal for any reason. The applicable Strategic Participant shall have the right to designate a new SP Nominee in the event any SP Nominee shall be removed or shall vacate his directorship for any reason. (c) Except as provided in Section 3.1(b)(ii) hereof, each of Loral and Holdings hereby agrees that, at any time that it is then entitled to vote for the election or removal 10 11 of directors, it will not vote to remove any SP Nominee unless such removal shall be at the request of the Strategic Participant that nominated such director, provided that if a majority of the Holdings Nominees determines that any SP Nominee has engaged in conduct that warrants the removal of such SP Nominee for Cause, then the Strategic Participant that had appointed such SP Nominee shall request that such SP Nominee be removed from the SS/L Board of Directors and Loral and Holdings may each vote its SS/L Shares to remove such director. In addition, if a majority of the SP Nominees determines that any Holdings Nominee has engaged in conduct that warrants the removal of such Holdings Nominee for Cause, then Holdings shall remove such Holdings Nominee from the SS/L Board of Directors. For the purposes of this Section 3.1(c), "Cause" shall mean the willful engaging by a director in conduct which is demonstrably and materially injurious to SS/L (other than in the exercise of such director's voting rights as a member of the SS/L Board of Directors), or the director's conviction of any crime constituting a felony. (d) No party shall, without the consent of Holdings or the applicable Strategic Participant, as the case may be, take any action that under the Charter Documents or this Agreement requires the approval of at least one Holdings Nominee or SP Nominee, as the case may be, if the only Holdings Nominees or SP Nominees, as the case may be, approving such action are Persons whose removal from the SS/L Board of Directors has been requested by Holdings or the applicable Strategic Participant, as the case may be, pursuant to this Agreement at or prior to the time of such action. Each of the parties hereto further covenants that it will use reasonable efforts to prevent any action from being taken by the SS/L Board of Directors during the pendency of any vacancy due to death, resignation, or removal of a director, unless the party entitled to have a person nominated by it elected to fill such vacancy shall have failed, for a period of ten (10) days after notice of such vacancy, to nominate a replacement; provided that the provisions of this sentence shall not apply in circumstances in which action must be taken by the SS/L Board of Directors to protect the best interests of SS/L. (e) The initial Holdings Nominees and SP Nominees are listed on Schedule 3.1(e) to the Agreement. (f) Each of the Loral Entities agrees that it will cause the SS/L Board of Directors not to delegate the right to take or approve any action to the Executive Committee or any other committee of the SS/L Board of Directors unless such delegation shall have received the prior, written approval (which may be by facsimile) of each of the Strategic Participants. Section 3.2 Actions by SS/L Board of Directors. (a) So long as any SP Nominees have been designated pursuant to this Agreement, neither SS/L nor any Subsidiary of SS/L shall take any action regarding the matters set forth in Section 3.2(b) below, unless such matters are duly approved by the SS/L Board of Directors. (b) Approval of the matters set forth below by the SS/L Board of Directors shall require a majority of a quorum of the SS/L Board of Directors and: (Y) at any time when there are three (3) SP Nominees, the approval of at least two (2) SP Nominees, and (Z) at any time when there are two (2) SP Nominees, at least one (1) SP Nominee; it being understood that 11 12 for purposes of this Section 3.2(b), an SP Nominee's abstention or failure to vote at a duly convened meeting of the SS/L Board of Directors shall be deemed approval: (i) any issuance or sale of its capital stock or of securities convertible into, exchangeable for or otherwise granting the right to acquire its capital stock (including options, warrants and other rights) to any person other than Loral or a person who is and remains a Subsidiary of Loral; (ii) any appointment as the chief executive officer, president, chief operating officer or executive vice president of SS/L of an individual who has not, as of the time of such appointment, served as a senior officer of SS/L for at least two years immediately preceding such appointment; (iii) the granting of (A) an exclusive license or (B) a nonexclusive license outside the ordinary course of business, to a third party (other than Loral and Loral Qualified Affiliates) of any Technology related to the business of SS/L; (iv) if the amount of participation as a team member or subcontractor in connection with SS/L Eligible Programs undertaken after the date of this Agreement awarded to date by SS/L to the Strategic Participants is less than the minimum amount contemplated by Section 2.2(c)(i) of the Operational Agreement (as such target participation is amended or modified from time to time as contemplated thereby), any contract or agreement with a third party (other than Loral and its Affiliates) for the purchase of products or services that a Strategic Participant is able to provide on competitive terms and is in the business of providing; (v) any technology-related agreements with Lockheed Martin other than as described in paragraph (xviii) of this Section 3.2(b); (vi) any new agreements with Lockheed Martin, other than under the immediately preceding clause, that involve payment of more than $100,000 in cash or equivalent services; and the provision by SS/L or Loral to Lockheed Martin of any confidential SS/L information, provided that no such approval is required for SS/L to renew agreements between SS/L and Lockheed Martin Tactical Systems, Inc. (formerly known as Loral Corporation) or its subsidiaries, that were properly authorized and in effect on April 23, 1996, each of which is identified in Schedule 3.2(b)(vi) hereto; (vii) any (A) acquisition or disposition of (x) a controlling interest in, or a majority of the voting stock or equity of, any corporation or other entity or (y) any other assets not in the ordinary course of business of SS/L the aggregate fair market value of which is greater than $500,000 in the case of any acquisition or $5,000,000 in the case of a disposition or (B) disposition of a line of business; (viii) entering into a new line of business or developing a new product that varies materially from the lines of business set forth in the Strategic Plan, provided 12 13 such new line of business or new product is within the Scope of Business of SS/L set forth in Section 2.1 of this Agreement; (ix) the adoption of, or material amendment to, the Strategic Plan; (x) the taking of any corporate action for the (A) commencement of a voluntary case under any applicable bankruptcy, insolvency or similar law now or hereafter in effect, (B) consent to the entry of any order for relief in an involuntary case under any such law to the extent that the giving or withholding of such consent is within SS/L's discretion, (C) consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of it or of any substantial part of its property or (D) making by it of a general assignment for the benefit of creditors; (xi) any conveyance, sale, lease, assignment, contribution to a joint venture, transfer or other disposition of all or substantially all of its property, business or assets (including, without limitation, inventory, receivables and leasehold interests), whether now owned or hereafter acquired; (xii) any merger, consolidation, recapitalization or other reorganization with or into any other Person; (xiii) any contract with a third party, other than Loral or its Affiliates, constituting (A) a teaming arrangement, other than teaming arrangements with local contracting parties necessary or desirable, in the judgment of the senior management of SS/L, to secure any contract or promote any bid in a country other than the United States, France and Italy, (B) a general agreement for strategic purposes or (C) any other agreements material to the business, operations or financial condition of SS/L out of the ordinary course of business of SS/L; (xiv) the election or appointment to the SS/L Board of Directors of any Person who is a representative of any third party; (xv) elimination of, or reductions in, elements of SS/L's operations that would materially and adversely affect SS/L's operation as a satellite prime contractor; (xvi) any material amendment to or modification of or waiver of, any material right under any agreement or instrument with respect to which approval under the provisions of this Section 3.2(b) was previously required; (xvii) initiation of a litigation, arbitration or other proceeding (except for proceedings between SS/L and a Strategic Participant) involving more than (A) $5,000,000 or (B) $3,000,000 if such litigation, arbitration or other proceeding is against, or names as an adverse party, a significant customer of any Strategic Participant other than an agency or instrumentality of the U.S. government; 13 14 (xviii) any agreement providing for SS/L to provide any technology or intellectual property rights to Lockheed Martin; (xix) any amendment to the By-laws or the Certificate of Incorporation of SS/L. Section 3.3 Blocked Matters.(a) Notwithstanding Section 3.2 above, in the event that any matter referred in paragraphs (vii) through (xix), inclusive, of Section 3.2(b) above, is approved over the opposition of one (1) SP Nominee (such matter a "Blocked Matter"; the Strategic Participant that designated that SP Nominee the "Sole Dissenter"), then SS/L may proceed with the implementation and consummation of the Blocked Matter, provided that (i) If within thirty (30) days after the date on which the Blocked Matter is approved: (A) the Sole Dissenter, at its discretion, sells all of its then Remaining Loral Securities in the principal market where such Remaining Loral Securities are traded, and (B) to the extent Remaining Loral Securities may not be sold on the market without registration under the U.S. Securities Act of 1933, as amended and applicable state securities laws ("Securities Laws"), the Sole Dissenter exercises its right to require Loral to register the sale of any of its then Remaining Loral Securities pursuant to the Securities Laws and then sells such Remaining Loral Securities promptly after the effectiveness of such registration, then, promptly following any such sale, Loral shall pay such Sole Dissenter any "Reimbursement Amount" that may be due; or (ii) If (A) the Sole Dissenter does not sell all its then Remaining Loral Securities pursuant to Section 3.3(a)(i), and (B) during the period from the thirty-first (31st) through the ninetieth (90th) day after the date on which the Blocked Matter is approved such Sole Dissenter, at its discretion, sells all of its then Remaining Loral Securities in the principal market where such Remaining Loral Securities are traded, then, promptly following any such sale Loral shall pay such Sole Dissenter any "Floor Reimbursement Amount" that may be due. (b) For purposes of this Section 3.3 and Section 6.1, "Reimbursement Amount" shall mean, with respect to a sale of all of a Strategic Participant's then Remaining Loral Securities, the product of multiplying (i) the amount by which the net proceeds per share of such sale or sales, after payment of all reasonable expenses, fees and commissions related thereto, are less than the higher of (X) the applicable Nominal Values of such Remaining Loral Securities held by the applicable Strategic Participant or (Y) the average of the high and low trading prices of Loral Common Stock and the Convertible Preferred Securities, as applicable, on the principal market where such securities are traded for the five trading days immediately preceding the date on which the Sole Dissenter voted against approval of a Blocked Matter (or, in applying Section 6.1, for the five trading days immediately preceding the Strategic Participant's written objection pursuant to Clause 6.1(b)(i)(Z)); by (ii) the number of such Remaining Loral Securities. (c) For purposes of this Section 3.3, "Floor Reimbursement Amount" shall mean, with respect to a sale of all of a Strategic Participant's then Remaining Loral Securities, 14 15 the product of multiplying (i) the amount by which the net proceeds per share of such sale or sales, after payment of all reasonable expenses, fees and commissions related thereto, are less than the lower of (X) the average of the high and low trading prices of Loral Common Stock and Convertible Preferred Securities, as applicable, on the principal market where such securities are traded for each of the five trading days immediately preceding the date on which the Sole Dissenter voted against approval of a Blocked Matter, or (Y) the average of the high and low trading prices of Loral Common Stock and Convertible Preferred Securities, as applicable, on each trading day during the thirty (30) days after the date on which the Blocked Matter is approved; by (ii) the number of such Remaining Loral Securities. (d) The dollar amounts set forth in the preceding Clause 3.3(b)(X) will be adjusted accordingly to reflect the effect of conversions, exchanges, splits, combinations, stock dividends, capital distributions and similar capital adjustments. Any Reimbursement Amount or Floor Reimbursement Amount shall be payable in the form of (A) cash or (B) at Loral's election, shares of Loral Common Stock which upon sale on the NYSE would provide the Strategic Participant Net Proceeds at least equal to the Reimbursement Amount or Floor Reimbursement Amount. Section 3.4 Appointment of Officers.(a) The Chairman/Chief Executive Officer, Vice Chairman, President/Chief Operating Officer and Executive Vice President of SS/L shall be nominated by Holdings and approved by a majority of the SS/L Board of Directors (subject to Section 3.2(b)(ii)). From and after the date hereof, the individuals listed on Schedule 3.4(a) hereto shall hold the offices set forth opposite their respective names until their resignation or removal therefrom. (b) If so requested by at least two (2) Strategic Participants, Holdings shall instruct the Holdings Nominees to vote for the removal of any officer of SS/L (A) if such officer shall intentionally take any action that such officer knows is inconsistent with the terms of this Agreement or (B) for Cause (as defined in Section 3.1(c)). ARTICLE IV MANAGEMENT OF SS/L Section 4.1 Strategic Plan. (a) Strategic Plan. The Strategic Plan will be amended and updated from time to time as provided herein and will be implemented by the management of SS/L through SS/L's annual budgets. The Loral Entities each agree to cause the management of SS/L to develop annual budgets ("Annual Budgets") which are designed to implement the Strategic Plan and to manage SS/L in a manner which is consistent with the Strategic Plan. (b) Procedures. The President/Chief Operating Officer of SS/L, with the advice and assistance of the Management Liaison Committee, will prepare an amended and updated Strategic Plan each year, and will submit a preliminary version of such amended and updated plan to the SS/L Board of Directors on or before February 15 of each year. Any such 15 16 amended and updated Strategic Plan shall not become effective unless and until it has been approved and adopted by the SS/L Board of Directors in accordance with the provisions of Section 3.2(b)(ix). If, upon the advice and with the counsel of the Management Liaison Committee, the President/Chief Operating Officer of SS/L deems it appropriate at any time to amend the Strategic Plan more frequently than as provided for in the preceding sentence, he may at any time recommend such amendments to the SS/L Board of Directors for its consideration. (c) Contents. The Strategic Plan as amended from time to time will, insofar as practicable, be of the same scope and level of detail as the Strategic Plan approved by the SS/L Board of Directors in April 1996, as amended in June 1996. Section 4.2 Management Liaison Committee. (a) Membership. Loral and each of the Strategic Participants will each appoint one member to a Management Liaison Committee of SS/L. Any party appointing a member of the Management Liaison Committee may change its appointee at any time and from time to time as it, in its sole discretion, deems appropriate, by notification to the President/Chief Operating Officer of SS/L. (b) Location/Expenses. SS/L will provide, at its expense, reasonable office, secretarial and other support facilities at the principal offices of SS/L in Palo Alto for each such member and will reimburse each such member for reasonable travel expenses incurred in connection with travel on assignments requested by the President/Chief Operating Officer of SS/L (which, without limitation, will not be deemed to include any travel to or from the United States and the country of incorporation of the appointing party or travel requested by or for the benefit of the appointing party). All other expenses associated with such member, including without limitation, salary, benefits and relocation expenses, will be borne by the party appointing such member. (c) Meetings. The members of the Management Liaison Committee will meet twice a month with the President/Chief Operating Officer of SS/L, and such members of his staff as the President/Chief Operating Officer may from time to time deem appropriate, to discuss all matters affecting SS/L which are of significance at the time, and any other SS/L matters which the President/Chief Operating Officer of SS/L or any member deems appropriate. The President/Chief Operating Officer of SS/L will preside at each meeting. Minutes will be kept of each meeting, copies of which will be circulated to the members promptly after the meeting and submitted for their approval at the subsequent meeting. A copy of the draft minutes and a copy of the approved minutes shall be submitted promptly to the Chairman of the Defense Security Committee (as defined in the Security Control Agreement). (d) Functions/Responsibilities. Except as otherwise specifically provided herein, the principal function of the Management Liaison Committee will be to advise and assist the President/Chief Operating Officer of SS/L and the Managing Directors of the Strategic Participants in developing and carrying out the Strategic Plan and to facilitate the working relationships between SS/L and the Strategic Participants on all joint issues (programs, research and development, quality, facilities, senior management personnel, etc.). 16 17 (e) Access to Information. SS/L shall at all times comply in all respects with all U.S. Government security requirements and export control laws. To the extent permitted by such requirements and subject to all other governmental laws, regulations and contractual restrictions, (a) Loral will cause SS/L to give each member of the Management Liaison Committee access to all pertinent information, records, facilities and personnel of SS/L, including but not limited to, SS/L's regular, monthly management meetings, financial data regarding program and company performance and information regarding the status of SS/L's material activities in pursuing new businesses and developing new ventures, and (b) SS/L will ensure that each such member is fully and regularly informed on a current basis of the ongoing programs and of the elements of the SS/L operations relevant to the implementation of the Strategic Plan. SS/L will use reasonable efforts to obtain waivers or consents consistent with applicable U.S. laws and regulations under any agreements with third parties that restrict the Strategic Participants' access to information otherwise available to them under this Section 4.2(e). ARTICLE V RESTRICTIONS ON TRANSFER OF CONTROL OF SS/L Section 5.1 Transfers in Accordance with this Agreement. Each of Loral and Holdings shall not, directly or indirectly, Transfer, in one or a series of transactions, any SS/L Shares, permit SS/L to issue any Common Stock or change or otherwise directly or indirectly Transfer Control over SS/L, except as expressly permitted by this Agreement. Section 5.2 Permitted Transfers. (a) Loral or Holdings may Transfer any SS/L Shares then owned by it, and Holdings may permit SS/L to issue SS/L Shares, to Loral or to a Permitted Transferee of Loral provided that Loral or Holdings, as the case may be, shall give each Strategic Participant prior written notice of such Transfer or issuance. After giving effect to such Transfer or issuance, any SS/L Shares owned by such Permitted Transferee shall be deemed to be owned by Loral for purposes of this Agreement for so long as such Transferee remains a Permitted Transferee of Loral while holding SS/L Shares. (b) Holdings may Transfer SS/L Shares to a Third Party provided such Transfer does not cause a Change of Control of SS/L to occur ("Third Party Transfer"), and provided further that Holdings shall give each Strategic Participant written notice describing such Third Party Transfer promptly after agreeing to the Third Party Transfer and in any event no later than ten (10) days before such Third Party Transfer is consummated. (c) Notwithstanding Sections 5.2(a) and 5.2(b), above, no Transfer or issuance of SS/L Shares shall be effective unless (i) the transferee or subscriber that is not a party to this Agreement shall have executed and delivered to SS/L and each Strategic Participant, as a condition precedent to such Transfer or issuance, an instrument or instruments reasonably satisfactory to the Strategic Participants, confirming that the Transferee or subscriber agrees to assume the obligations of Holdings under this Agreement, and (ii) the Transferee or subscriber is a Qualified Third Party. 17 18 (d) Any subsequent Transfer of SS/L Shares acquired by (i) a Third Party Transferee, or (ii) a Permitted Transferee or Affected Permitted Transferee of Loral, shall be subject to the provisions of this Section 5.2 in the same manner as though such SS/L Shares were owned by Holdings, for which purposes all references to Holdings in this Section 5.2 (other than in Section 5.2(f) below)) shall also be deemed to refer to such Third Party Transferee, Permitted Transferee or Affected Permitted Transferee. (e) Any Transfer of SS/L Shares owned by Loral shall be subject to the restrictions set forth in this Section 5.2 with respect to the Transfer of SS/L Shares owned by Holdings, for which purposes all references to Holdings therein shall be deemed also to refer to Loral. (f) If Holdings should cease to own more than 50% of the outstanding voting Common Stock of SS/L, Holdings shall lose all rights hereunder as Holdings (including without limitation the right pursuant to this Agreement to designate members of the SS/L Board of Directors). Promptly following such event, at Loral's request, every party hereto shall vote for, and otherwise use its reasonable best efforts to cause the certificate of incorporation of SS/L to be amended to provide for, cumulative voting for the election of directors (as such procedure is described in Section 214 of the General Corporation Law of the State of Delaware). Section 5.3 Purchase Options of Strategic Participants. (a) Except pursuant to and in accordance with this Section 5.3, (i) none of the Loral Entities may, directly or indirectly, through one or a series of transactions, conduct, permit or suffer to exist a Change of Control over SS/L (which, for the avoidance of doubt, would include a Change of Control of any of the Loral Entities or any Loral Permitted Transferee that holds SS/L Shares) (any such Change of Control being a "Loral Change of Control"), and (ii) Holdings may not Transfer SS/L Shares if such Transfer would cause a Change of Control of SS/L (such Transfer a "Change of Control Transfer"). (b) Prior to any Loral Change of Control or Change of Control Transfer, Loral shall give written notice to each of the Strategic Participants (such notice the "Change of Control Notice") setting forth (i) that a Loral Change of Control or a Change of Control Transfer will occur; (ii) if a Loral Change of Control will occur, the circumstances and relevant facts of such Change of Control, including information with respect to pro forma historical income, cash flow and capitalization of the relevant Loral Entity or Loral Permitted Transferee, as the case may be, after giving effect to such Loral Change of Control, provided that if such information is unavailable at the time of delivery of such Change of Control Notice, Loral shall provide such information to each Strategic Participant as promptly as practicable after such information becomes available; (iii) all the stockholders of SS/L, the number of SS/L Shares owned by each stockholder of SS/L, and the aggregate number of SS/L Shares then issued and outstanding (all such shares the "Outstanding SS/L Shares"). (c) The Change of Control Notice for a Loral Change of Control shall offer to sell the Outstanding SS/L Shares to the Strategic Participants for a cash price per share equal to the then Fair Market Value of SS/L as determined in good faith by the SS/L Board of Directors 18 19 subject to adjustment pursuant to Section 5.3(d). The Change of Control Notice for a Change of Control Transfer, shall offer to sell SS/L to the Strategic Participants for a cash price set forth in such notice equal to the price per share at which the Outstanding SS/L Shares are being offered for sale (such cash price or the Fair Market Value, as the case may be, the "Offer Price"). The Change of Control Notice shall constitute an irrevocable offer by each of Holdings, Loral, the Loral Permitted Transferees, Loral Affected Permitted Transferees and Third Party Transferees set forth as SS/L stockholders in the Change of Control Notice, to sell their respective SS/L Shares to each of the Strategic Participants, pro rata, at the Offer Price, subject to adjustment pursuant to Section 5.3(d). (d) If any Strategic Participant is unwilling to accept the Fair Market Value determined by the SS/L Board of Directors, then such Strategic Participant shall select an internationally recognized investment bank (the "Participant Investment Bank") within seven (7) days of receiving the Change of Control Notice containing the proposed Fair Market Value, and the Participant Investment Bank shall make a determination of the Fair Market Value. If Loral and any of the affected Strategic Participants are unable to agree upon the Fair Market Value within 20 days after the Participant Investment Bank delivers its Fair Market Value determination, Loral and such Strategic Participants shall within 10 days select another internationally recognized investment bank (the "Other Investment Bank"), which shall make its determination of the Fair Market Value. In such event, the Fair Market Value shall be the average of the three determinations, disregarding any determination that is more than 20% larger or smaller than the determination that is between the highest and the lowest determinations. SS/L shall cooperate with all such investment banks in connection with the determination of Fair Market Value and shall give the selected investment banks access to the books, records and personnel of SS/L and its Subsidiaries (including all historical and projected financial and operating information reasonably necessary to determine Fair Market Value), and SS/L shall pay all fees and expenses of such investment banks incurred in connection with the determination of Fair Market Value. (e) Within thirty (30) Business Days of receipt of the Change of Control Notice (or within thirty (30) Business Days following final determination of Fair Market Value pursuant to Section 5.3(d)), each of the Strategic Participants may elect to purchase ("Purchase Option"), on a pro rata basis, the Outstanding SS/L Shares at the Offer Price and on the terms and conditions set out in the Change of Control Notice by delivery of a notice (a "Purchase Notice") to Loral, with copies to SS/L and the other Strategic Participants, stating that such Strategic Participant elects to purchase its pro rata portion of the Outstanding SS/L Shares at the Offer Price and on the terms and conditions set out in the Change of Control Notice. Each Strategic Participant shall be entitled to purchase its "pro rata" portion of the Outstanding SS/L Shares, which shall be computed by multiplying the number of Outstanding SS/L Shares by the fraction, the numerator of which is the number of shares of Loral Common Stock (including the number of such shares receivable upon conversion of any Convertible Preferred Securities) comprising the then Remaining Loral Securities of such Strategic Participant and the denominator of which is the number of all shares of Loral Common Stock comprising such Remaining Loral Securities of the Strategic Participants as a group. Any Outstanding SS/L Shares not covered by a Purchase Notice may be purchased by the other Strategic Participants on 19 20 the terms and conditions set out in this Section 5.3(e). Notice to exercise this right (the "Second Purchase Notice") must be given within ten (10) Business Days after the expiration of the thirty (30)-day period referred to above. Delivery of a Purchase Notice or a Second Purchase Notice shall constitute a contract between each of Holdings, Loral, Loral Permitted Transferees, Loral Affected Permitted Transferees and Third Party Transferees set forth as SS/L stockholders in the Change of Control Notice, on the one hand, and such Strategic Participant, on the other, for the sale and purchase of the applicable portion of the Outstanding SS/L Shares at the Offer Price and upon the other applicable terms and conditions set forth in the Change of Control Notice. (f) The rights of each Strategic Participant under this Section 5.3: (i) are conditioned upon the purchase of all (and not less than all) of the Outstanding SS/L Shares by one or more Strategic Participants pursuant to the aforementioned procedures and (ii) may be assigned in whole or in part to one or more SP U.S. Assignees in which case all references to Strategic Participants in Section 5.3 shall be deemed also to refer to such SP U.S. Assignee. (g) If the Strategic Participants fail to deliver Purchase or Second Purchase Notices with respect to all of the Outstanding SS/L Shares specified in the Change of Control Notice as provided in Section 5.3(e), then Loral, LSC Corp., Holdings or the Loral Permitted Transferee, as the case may be, may, within one (1) year (such period the "Permitted Sale Period") following the expiration of the deadlines for delivery of such notices set forth in Section 5.3(e), complete the Loral Change of Control or the Change of Control Transfer, as the case may be, described in the Change of Control Notice; provided that (a) the per share price of any SS/L Shares Transferred in connection with such Change of Control Transfer is at least 95% of the Offer Price and (b) the terms and conditions applicable to such Change of Control Transfer are similar in all material respects to the terms and conditions set forth in the Change of Control Notice; provided further that the Strategic Participants shall have the opportunity to exercise the rights set forth in Section 5.4, as a condition precedent to consummation of such Loral Change of Control or such Change of Control Transfer. (h) If the Strategic Participants do not purchase the Outstanding SS/L Shares as provided in Section 5.3(e) and the Loral Change of Control or the Change of Control Transfer does not occur as set forth in Section 5.3(b), the Purchase Option procedures set forth in Sections 5.3(b), 5.3(c), 5.3(d) and 5.3(e) shall again apply in connection with any subsequent Loral Change of Control or Change of Control Transfer. (i) Any SS/L Shares acquired by a Permitted Transferee or Affected Permitted Transferee of Loral, shall be subject to the provisions of this Section 5.3 in the same manner as though such SS/L Shares were owned by Holdings, for which purposes all references to Holdings in this Section 5.3 shall also be deemed to refer to such Permitted Transferee or Affected Permitted Transferee. (j) Any Transfer of SS/L Shares owned by Loral shall be subject to the restrictions set forth in this Section 5.3 with respect to the Transfer of SS/L Shares owned by Holdings, for which purposes all references to Holdings therein shall be deemed also to refer to Loral. 20 21 (k) The Purchase Notices delivered by Strategic Participants shall designate a closing date (the "Purchase Closing Date") which (i) if delivered in connection with a Loral Change of Control Transfer, shall not be more than ten (10) Business Days after the later of (A) the last Purchase or Second Purchase Notice delivered by a Strategic Participant or (B) the expiration of all regulatory holding periods (including waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the obtaining of all governmental approvals, if any, applicable to such purchase or (ii) if delivered in connection with a Loral Change of Control, shall be the later of (A) the time of closing of the transactions causing the Loral Change of Control and (B) the expiration of all regulatory holding periods (including waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the obtaining of all governmental approvals, if any, applicable to such purchase, including, with respect to Aerospatiale, the approval of the MOD required pursuant to Decret No.53-707 of 9 August 1953, modified by Decret No. 78-173 of 16 February 1978 (such approval, the "MOD Approval"). The closing shall be held at 10:00 a.m., local time on the Purchase Closing Date at the principal office of Loral, or at such other time or place as the parties to such transaction mutually agree. (l) On the Purchase Closing Date, each of Holdings, Loral, Loral Permitted Transferees, Loral Affected Permitted Transferees and Third Party Transferees set forth as SS/L stockholders in the Change of Control Notice shall, with respect to the SS/L Shares each owns, deliver (i) certificates appropriately endorsed and representing the SS/L Shares being sold, free and clear of any lien, claim or encumbrance and (ii) such other documents including, without limitation, executed stock powers and evidence of ownership and authority, as the purchasers may reasonably request. The purchase price shall be paid by wire transfer of immediately available U.S. funds (or such other currency as the parties thereto may agree) no later than 2:00 p.m. on the Purchase Closing Date. Section 5.4 Exchange Options of Strategic Participants. (a) Subject to Section 5.3, prior to a Loral Change of Control or Change of Control Transfer, each Strategic Participant shall have the option ("Exchange Option") to elect either (i) to transfer to Loral its then Remaining Loral Securities and, in exchange therefor, Loral shall transfer SS/L Shares to such Strategic Participant (the "Direct Exchange"), or, at Loral's direction (ii) to sell its then Remaining Loral Securities on the principal market where such Remaining Loral Securities are traded and to use the Net Proceeds from such sale to purchase SS/L Shares from Loral (the "Indirect Exchange"), provided that no Direct Exchange or Indirect Exchange may occur unless Strategic Participants holding at least a majority in Nominal Value of all the then Remaining Loral Securities elect to exercise their Exchange Options. (b) The Strategic Participants may elect to exercise their rights under this Section 5.4 by delivery of a notice ("Exchange Notice") to Loral within thirty (30) days after receiving the Change of Control Notice for such Loral Change of Control or Change of Control Transfer, provided that if within this thirty (30) day period a Strategic Participant (i) determines in good faith that it needs additional time to decide whether to exercise the Exchange Option and (ii) notifies Loral accordingly, then, such Strategic Participant shall have an additional fifteen (15) days following the thirty (30) day period to exercise the Exchange Option. During such 21 22 period, Loral shall provide the Strategic Participants such additional information relating to such Loral Change of Control or Change of Control Transfer not already provided pursuant to Section 5.3(b) as any Strategic Participant may reasonably request. A Strategic Participant may, at its election, condition exercise of its Exchange Option on consummation of such Loral Change of Control or Change of Control Transfer, such election to be set forth in the Exchange Notice. Within five (5) Business Days after a Strategic Participant delivers an Exchange Notice to Loral, Loral shall deliver a written notice ("Election Notice") to such Strategic Participant electing either a Direct Exchange or Indirect Exchange, provided that if Loral does not deliver such notice within the five (5)-day period described above, Loral shall be deemed to have elected a Direct Exchange. (c) For purposes of a Direct Exchange: (i) the per share value of the portion of such Remaining Loral Securities consisting of Loral Common Stock would be equal to the average of the high and low prices of Loral Common Stock on the NYSE for the five (5) trading days immediately preceding the date of delivery of the Exchange Notice by such Strategic Participant; (ii) the per share value of the portion of such Remaining Loral Securities consisting of Convertible Preferred Securities would be equal to the average of the high and low trading prices (or, if applicable, the high and low bid and asked prices) of such securities on their principal trading markets for the five (5) trading days immediately preceding the date of delivery of the Exchange Notice by such Strategic Participant; (iii) the per share value of any portion of such Remaining Loral Securities not described in paragraphs (i) or (ii) above (the "Remaining Portion") would be equal to the average of the high and low prices or bid and asked prices, as the case may be, of such Remaining Portion as quoted on the principal market where such securities are traded for the five (5) trading days immediately preceding the date of delivery of the Exchange Notice by such Strategic Participant; and (iv) the per share value of SS/L Shares would be equal to the Offer Price or, as applicable, the Fair Market Value as adjusted pursuant to Section 5.3(d). (d) If a Strategic Participant exercises its Exchange Option and Loral elects the Indirect Exchange pursuant to Section 5.4(b), such Strategic Participant shall, within five (5) Business Days following receipt of the Election Notice, sell its then Remaining Loral Securities on the principal market where such Remaining Loral Securities are traded, provided that, to the extent any such Remaining Loral Securities may not be sold on the market without registration under Securities Laws, Loral shall register the sale of such Remaining Loral Securities under the Securities Law promptly after delivery of the Election Notice and the Strategic Participant shall sell such Remaining Loral Securities promptly after the effectiveness of such registration. Such Strategic Participant shall use the net proceeds from the sale of its then Remaining Loral Securities pursuant to this Section 5.4(d) (after payment of all expenses in connection therewith, 22 23 including fees, commissions and capital gain or income taxes, if any) (the "Net Proceeds") to purchase from Loral, and Loral shall be obligated to sell to such Strategic Participant, the same number of SS/L Shares that the Strategic Participant would have obtained in a Direct Exchange. (e) If Direct Exchanges or Indirect Exchanges would cause the participating Strategic Participants to receive in the aggregate a number of SS/L Shares that exceed 49% of the SS/L Shares that would be outstanding following such Direct Exchanges or Indirect Exchanges, each such Strategic Participant shall, at its election, either (i) withhold from its Direct Exchange or Indirect Exchange, as the case may be, the portion of its then Remaining Loral Securities having a value equivalent to such Strategic Participant's pro rata share of the value of the SS/L Shares that would cause the Strategic Participants to exceed 49% ownership of SS/L Shares (such pro rata share the "Prorated Excess Value"), or (ii) receive, in lieu of the SS/L Shares that would be issued for Remaining Loral Securities having the Prorated Excess Value, shares of non-voting stock of SS/L equivalent in value to the Prorated Excess Value. (f) Immediately upon the closing of transactions contemplated by exercise of Exchange Options pursuant to Section 5.4, (i) the Strategic Participants participating in the Exchange, Loral Entities, Loral Permitted Transferees that hold any SS/L Shares, any successor or Transferee of any Loral Entity or Loral Permitted Transferee of SS/L Shares following the Change of Control of SS/L, and SS/L shall thereupon become parties to the Restated Stockholders Agreement, which would control, to the exclusion of any other agreements or arrangements not therein contemplated, the governance of SS/L, (ii) each such Strategic Participant shall accept the rights and assume the obligations of Strategic Participants under the Restated Stockholders Agreement subject to Section 5.4(g) below, (iii) in the event of a Loral Change of Control, the Loral Entities or their respective successors, as the case may be, or in the event of a Change of Control Transfer the Transferee of the Change of Control Transfer shall succeed to the rights and assume the obligations of the Loral Entities under the Restated Stockholders Agreement, and (iv) any Affiliate of such successor or Transferee that conducts activities within SS/L's "Scope of Business" as defined in the Restated Stockholders Agreement shall be substituted for Lockheed Martin for purposes of the rights of the Strategic Participants under the Restated Stockholders Agreement. (g) A Strategic Participant that reacquires SS/L Shares pursuant to exercise of an Exchange Option shall have the rights and obligations of such Strategic Participant under the Restated Stockholders Agreement even if the SS/L Shares acquired by such Strategic Participant represent less than the minimum percentage ownership of SS/L Shares required to maintain Strategic Participant rights under the Restated Stockholders Agreement, provided that if a Strategic Participant's percentage ownership of SS/L Shares at the time it reacquires SS/L Shares is less than such minimum percentage ownership level, the Strategic Participant thereafter shall lose the rights and obligations of a Strategic Participant under the Restated Stockholders Agreement if upon subsequently Transferring any of its SS/L Shares such Strategic Participant's percentage ownership of SS/L Shares falls below such minimum percentage ownership level. (h) The closing date (the "Exchange Closing Date") shall occur, unless the parties thereto shall otherwise agree, on the tenth (10) Business Day after the later of (i) the date -23- 24 the last Exchange Notice is given by a Strategic Participant, (ii) if any exercise of an Exchange Option is conditioned on consummation of the Loral Change of Control or Change of Control Transfer, the date of such consummation, (iii) if any Indirect Exchanges are elected by Loral, the date the applicable Strategic Participants complete sales of Remaining Loral Securities pursuant to Section 5.4(d), and (iv) the expiration of all regulatory holding periods (including waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the obtaining of all governmental approvals, if any, applicable to such exchange (including, with respect to Aerospatiale, MOD Approval). The closing shall be held at 10:00 a.m., local time on the Exchange Closing Date at the principal office of Loral, or at such other time or place as the parties to such transaction mutually agree. (i) On the Exchange Closing Date, (i) for purposes of a Direct Exchange, the Strategic Participants shall deliver certificates representing the Remaining Loral Securities appropriately endorsed and representing the stock or obligations being sold, free and clear of any lien, claim or encumbrance, (ii) Loral and Holdings or their respective successors shall deliver certificates representing their respective SS/L Shares being exchanged appropriately endorsed and representing the stock or obligation being sold, free and clear of any lien, claim or encumbrance, and (iii) the parties shall deliver such other documents including, without limitation, executed stock powers and evidence of ownership and authority, as the other parties may reasonably request. Any Net Proceeds payable to Loral by a Strategic Participant or other payable amounts shall be paid by wire transfer of immediately available U.S. funds (or such other currency as the parties thereto may agree) no later than 2:00 p.m. on the Exchange Closing Date. (j) Loral and each of the Loral Entities shall cause the completion of any Direct Exchanges or Indirect Exchanges pursuant to this Section 5.4 to be conditions precedent to any Change of Control Transfer or consummation of the portion of any Loral Change of Control that affects SS/L. ARTICLE VI ADDITIONAL RIGHTS AND OBLIGATIONS OF THE PARTIES Section 6.1 Regulatory Compliance.(a) The parties hereto and DoD have entered into the Security Control Agreement, providing, inter alia, for certain measures to negate foreign ownership, control or influence ("FOCI") over SS/L, as provided in Section 2-205(a) of the Industrial Security Regulations. (b) If (i) a change of law requires SS/L or any Strategic Participant to adopt any measures (X) in addition to those contemplated by the Security Control Agreement, (Y) that have a material adverse effect on (aa) the business or operations of such Strategic Participant or (bb) the rights of such Strategic Participant under this Agreement and (Z) to which such Strategic Participant objects in writing within ninety (90) days of receipt of notice from SS/L specifying the measures to be adopted (such Strategic Participant an "Affected SP"), and (ii) within ninety (90) days after receipt by the Affected SP of such notice from SS/L, the Affected SP sells its then -24- 25 Remaining Loral Securities in the principal market where such Remaining Loral Securities are traded, and to the extent Remaining Loral Securities cannot be sold on the market without registration under the U.S. Securities Act of 1933, as amended and Securities Laws, the Affected SP exercises its right to require Loral to register the sale of any then Remaining Loral Securities pursuant to the Securities Laws and then sells such Remaining Loral Securities promptly after the effectiveness of such registration, then, promptly following any such sale, Loral shall pay such Affected SP any Reimbursement Amount that may be due. Section 6.2 U.S. Government Contracts; National Security Matters. (a) For so long as Holdings continues to own a majority of the voting Common Stock of SS/L, the Holdings Nominees shall constitute a majority of the SS/L Board of Directors and shall have the authority to approve, on behalf of the SS/L Board of Directors, in the name and on behalf of SS/L, all matters affecting the operations and conduct of the business of SS/L, except as expressly set forth in Section 3.2. All Holdings Nominees shall be citizens of the United States. (b) Without limitation of the foregoing Section 6.2(a), the Holdings Nominees shall have sole responsibility, on behalf of the SS/L Board of Directors of SS/L, for supervision, implementation and execution in the name and on behalf of SS/L of the following matters, notwithstanding anything to the contrary contained in Section 3.2 or in other provisions of this Agreement: (i) the performance of work involving Classified Information (as defined below) by SS/L under all contracts and agreements; (ii) the conduct of any research programs by SS/L to the extent that any Classified Information is utilized or produced therefrom; (iii) the implementation of all resolutions by the SS/L Board of Directors required by the Security Control Agreement; and (iv) all other United States national security policy matters and matters affecting the safeguarding of Classified Information and technical data under United States export control laws. For the purposes of this Section 6.2(b), "Classified Information" shall mean information or material that is (i) owned by, produced by or for, or under the control of the United States Government, (ii) determined under Executive Order 12356 or other relevant orders to require protection against unauthorized disclosure and (iii) so designated. Section 6.3 Performance of SS/L Obligations. (a) Loral shall cause SS/L to perform SS/L's obligations under this Agreement and under the Operational Agreement. Each of Loral and SS/L hereby represents and warrants that SS/L has adopted a written policy currently in effect, regarding "SS/L Policy on Alliance With European Partners" (the "Alliance Policy"), a complete and accurate copy of which has been delivered to each of the Strategic Participants on the date of "Closing" under the Exchange Agreement. SS/L covenants to implement and enforce, and each of the Loral Entities agrees to cause SS/L to implement and -25- 26 enforce, the Alliance Policy in a reasonable fashion. The Alliance Policy and its effectiveness shall not be modified without the written consent of the Strategic Participants. (b) SS/L covenants that it will act, and each of the Loral Entities agrees to cause SS/L to act, in accordance with its Charter Documents. Loral and Holdings shall vote all of their respective SS/L Shares at any regular or special meeting of stockholders of SS/L or in any written consent executed in lieu of such a meeting of stockholders, and shall take all action necessary, to ensure (i) that the Charter Documents of SS/L do not, at any time, conflict with the provisions of this Agreement and (ii) that, unless an amendment is approved by the SS/L Board of Directors, the Charter Documents of SS/L continue to be in effect in the form attached hereto as Schedules 7.1(a)(i) and 7.1(a)(ii). Section 6.4 Confidentiality. Notwithstanding anything to the contrary contained in this Agreement, any written information regarding the bidding or pricing of work and other competitive matters, or any other proprietary information, relating to SS/L or a Strategic Participant will be disclosed hereunder only to those employees of any party hereto having a need to know such information for purposes of performing their duties under and engaging in activities contemplated by this Agreement and the Operational Agreement, including performance of their duties as members of the Management Liaison Committee or Research and Development Committee contemplated by the Operational Agreement, and such information shall not be used for any other purpose. All such information shall be returned to the applicable party by each of the other parties hereto (or destroyed with no copies retained) upon termination of this Agreement with respect to (i) all parties hereto or (ii) a Strategic Participant in accordance with Section 8.1, and no party shall make any use whatsoever of such information after it shall have ceased to be a party hereto. Section 6.5 Government Approval of Information Access. SS/L shall use its reasonable best efforts to apply for and obtain in a timely manner all government consents, approvals, licenses or other authorizations that may be required (i) in order for employees or other representatives of any party hereto that is a non-US Person to have access to all non-classified information in the possession of SS/L and its Subsidiaries that such employees or representatives require in order to perform their duties as directors of SS/L or members of the Management Liaison Committee or Research and Development Committee as contemplated in the Operational Agreement or (ii) in order that a Transfer of SS/L Shares to a Qualified Third Party may be made in accordance with the terms and conditions of this Agreement. Section 6.6 Merger of SS/L. If SS/L is merged into or consolidated with Loral or any of its Affiliates, Loral shall cause the by-laws of the surviving or resulting entity to be amended so that the rights of the Strategic Participants hereunder with respect to SS/L are maintained with respect to such surviving or resulting entity. Section 6.7 New Ventures. Loral shall cause each of the Strategic Participants to be provided a meaningful opportunity to participate in all new business ventures created or materially developed by SS/L and controlled by Loral or a Loral Affiliate. Loral shall provide each Strategic Participant relevant information regarding such opportunity, and will cause the -26- 27 Strategic Participants to be offered the same rights and benefits that are offered to comparable investors that invest in the first round of financing for such ventures. ARTICLE VII REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.1 Loral, Holdings and SS/L. (a) Each of the Loral Entities and SS/L hereby represents and warrants to each of the Strategic Participants as of the date of this Agreement as follows: (i) Schedule 7.1(a)(i) is a complete and accurate copy of the Certificate of Incorporation of SS/L in effect as of the date hereof; (ii) Schedule 7.1(a)(ii) is a complete and accurate copy of the By-laws of SS/L in effect as of the date hereof; (iii) the list of individuals serving as members of the SS/L Board of Directors and individuals serving as officers of SS/L contained in Schedule 7.1(a)(iii) is complete, accurate and current as of the date hereof; and (iv) the list of stockholders of SS/L and the corresponding number and kind of shares of SS/L stock held by each such stockholder contained in Schedule 7.1(a)(iv) is complete, accurate and current as of the date hereof. (b) Each of the Loral Entities hereby represents, warrants and covenants to each of the Strategic Participants that: (i) the respective rights of the Strategic Participants hereunder with respect to SS/L (including but not limited to rights relating to the governance of SS/L set forth in Article III) are exclusive, and (ii) no third party has been or shall be afforded any such rights or similar rights without the written consent of each of the Strategic Participants. ARTICLE VIII TERMINATION Section 8.1 Termination (a) This Agreement shall terminate (i) upon mutual agreement by the parties hereto; (ii) with respect to any Strategic Participant, after such Strategic Participant shall have sold or otherwise disposed of, or shall have agreed to sell or otherwise dispose of, to a third party other than a Permitted Transferee of such Strategic Participant (except as expressly permitted herein) Loral Exchange Agreement Securities having an aggregate Nominal Value of greater than $17,200,000; (iii) with respect to any Strategic Participant, upon termination of the Operational Agreement with respect to such Strategic Participant, whether pursuant to its terms or otherwise; (iv) upon the effectiveness of the Restated Stockholders Agreement following a Direct Exchange or an Indirect Exchange, in -27- 28 accordance with Section 5.4(f); or (v) if the Strategic Participants do not (A) purchase the Outstanding SS/L Shares as provided in Section 5.3(e) or (B) exercise the rights in Section 5.4(b), upon the closing of the Loral Change of Control or the Loral Change of Control Transfer. Hypothetical examples illustrating the intended operation of clause (ii) of this Section 8.1(a) are contained in Exhibit M to the Exchange Agreement, a complete and accurate copy of which exhibit has been delivered to Finmeccanica on or prior to the date hereof. (b) Each Strategic Participant shall notify the other parties hereto in writing of any sale of, or agreement to sell, any Loral Exchange Agreement Securities no later than two (2) days following such sale or agreement. (c) Sections 6.4 and 9.1 shall survive any termination of this Agreement. ARTICLE IX MISCELLANEOUS Section 9.1 Arbitration. (a) Any claim or controversy arising between any of the Loral Entities or SS/L, on the one hand, and the Strategic Participants, on the other hand, under this Agreement shall be finally decided by arbitration. Any party hereto may invoke arbitration under this Section 9.1 by notice to others and the filing of such notice with the International Chamber of Commerce (the "ICC"), Geneva, Switzerland. Any party shall have the right within thirty (30) days after receiving notice under this Agreement from any other party (or from joinder of a new party to the arbitration) to be joined as a party in any arbitration initiated hereunder between the other parties hereto or to join as a party in the arbitration one or more other parties hereto. Any party joined in arbitration shall have the right within thirty (30) days from such joinder to join in its turn any other party hereto not yet a party to the arbitration. All joinders shall be effected by notice given to all parties in accordance with this Agreement. (b) Arbitration shall be held in Geneva, Switzerland under the auspices of the ICC pursuant to the Commercial Arbitration Rules of the ICC and before one arbitrator selected by the ICC; provided that any party to the arbitration may require that the arbitration be held before three arbitrators selected by the ICC. (c) Each party shall submit its case in writing to the arbitrators within one (1) month of the selection of the arbitration panel. The language of the arbitration shall be English. The arbitrators are empowered to determine questions both of fact and of law, but shall to the maximum extent possible construe this Agreement strictly in accordance with its terms and conditions and the purposes and intents evinced thereby. Any applicable statute of limitations shall be a defense against any claim, dispute or other matter in any arbitration hereunder. The scope and method of discovery shall be determined by the arbitrators. Whether a hearing shall be held or additional evidence accepted, and the rules governing any such hearing, shall be in the sole discretion of the arbitrators, subject to the ICC rules as they construe them. All decisions of the arbitrators shall be by majority vote. The arbitrators shall make their decision in writing at the earliest convenient date. The costs of arbitration, including the fees of the arbitrators, shall 28 29 be in the discretion of the arbitrators, who may direct to and by whom and in what manner these costs or any part thereof shall be paid. (d) To the maximum extent permitted by law, the decision of the arbitration tribunal shall be final and binding on the parties to this Agreement and not subject to appeal. If a party against whom the arbitration tribunal renders an award fails to abide by such award, the other party may bring an action to enforce the same in a court of competent jurisdiction. Section 9.2 No Inconsistent Agreements. Each of SS/L and the Loral Entities shall not, and shall not permit any of their respective Subsidiaries or Affiliates to, (i) enter into any agreement with respect to its securities or take any action which is inconsistent with the rights granted to the Strategic Participants in this Agreement, or (ii) make any change, amendment, alteration or modification to its corporate charter or bylaws (except, in the case of SS/L, changes permitted by this Agreement) or enter into any other agreement, which would adversely affect the rights of a Strategic Participant under this Agreement or the Operational Agreement. Each of SS/L and the Loral Entities represents and warrants to each Strategic Participant that it has not, and their respective Subsidiaries and Affiliates have not, prior to the date hereof entered into any such agreement or taken any such action. Section 9.3 LSC Corp. and Holdings and SS/L Agreements. Loral shall cause LSC Corp., Holdings and any Permitted Transferee of Loral that holds SS/L Shares duly to perform their respective obligations under this Agreement. Section 9.4 Recapitalization, Exchanges, etc. In the event that any capital stock or other securities are issued in respect of, in exchange for, or in substitution of, any SS/L Shares by reason of any reorganization, recapitalization, reclassification, merger, consolidation, spin-off, partial or complete liquidation, stock dividend, split-up, sale of assets, distribution to stockholders or combination of the SS/L Shares or any other change in capital structure of SS/L, appropriate adjustments shall be made with respect to the relevant provisions of this Agreement so as to fairly and equitably preserve, as far as practicable, the original rights and obligations of the parties hereto under this Agreement and the term "SS/L Shares," as used herein, shall be deemed to include shares of such capital stock or other securities, as appropriate. Section 9.5 Successors and Assigns. (a) This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, and their respective successors and permitted assigns; provided that (i) neither this Agreement nor any rights or obligations hereunder may be transferred or assigned by SS/L or any of the Loral Entities without the written consent of the Strategic Participants and (ii) the rights and obligations of a Strategic Participant under this Agreement may be assigned only to a Permitted Transferee of such Strategic Participant or as otherwise expressly permitted herein. No third party shall acquire the rights of a Strategic Participant hereunder unless such third party shall also become a party to, and agrees to be bound by, this Agreement, and the Operational Agreement with the prior written consent of the other parties thereto. (b) Notwithstanding Sections 8.1(a) and 9.5(a) above, if (i) two (2) or more Strategic Participants should transfer to another entity ownership of their business operations 29 30 involving the design, development, manufacture, sale and launch of Space Systems and the operation thereof to the extent such operation occurs in connection with launch services and before turnover of a Space System to a customer, or should combine such operations, and (ii) such other entity or the surviving or combined entity, as the case may be,: (Y) is owned or controlled, directly or indirectly, by Aerospatiale, Alcatel Alsthom, Alcatel NV or Finmeccanica, and (Z) directly or indirectly holds all the then Remaining Loral Securities previously held by the constituent Strategic Participants, then such other entity or surviving or combined entity, as the case may be, shall continue to have all the rights, and be subject to all the obligations, of each of the constituent Strategic Participants as if such transfer of ownership or combination of operations had not occurred. (c) Promptly following any Change of Control (other than as may be described in Section 9.5(b) or Section 9.5(d)) or any agreement for such Change of Control, over a Strategic Participant (or a Permitted Transferee of such Strategic Participant's rights hereunder), such Strategic Participant (or such Permitted Transferee) shall provide notice to the other parties hereto containing the information required in a Change of Control Notice. This Agreement shall terminate with respect to that Strategic Participant (or its Permitted Transferee) following such Change of Control if any two (2) of Loral and the unaffected Strategic Participants believe that the Person which gains Control over that Strategic Participant (or its Permitted Transferee) and the other parties hereto have significant competing interests. (d) Notwithstanding anything to the contrary herein, a Person that Controls a Strategic Participant may transfer the ownership or assets (including the Remaining Loral Securities) of such Strategic Participant to or among companies that such Person Controls without such Strategic Participant losing any of its rights and obligations hereunder as a Strategic Participant. Section 9.6 No Waivers; Amendments. (a) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. (b) This Agreement may not be amended, modified or supplemented other than by a written instrument signed by each party hereto except that the consent of a party hereto shall not be required if the rights or obligations of such party hereunder are not adversely affected by such amendment, modification or supplement. (c) Any provision of this Agreement may be waived if, but only if, such waiver is in writing and is signed by the party against whom the enforcement of such waiver is sought. Section 9.7 Notices. All notices, demands, requests, consents or approvals (collectively, "Notices") required or permitted to be given hereunder or which are given with respect to this Agreement shall be in writing and shall be personally served or mailed, registered or certified, return receipt requested, postage prepaid (or by a substantially similar method), or 30 31 delivered by a private courier service of international standing and recognition with charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile, addressed as set forth below, or such other address as such party shall have specified most recently by written notice. Notice shall be deemed given or delivered on the date of service or transmission if personally served or transmitted by telegram, telex or facsimile. Notice otherwise sent as provided herein shall be deemed given or delivered on the third business day following the date mailed or on the next business day following delivery of such notice to a reputable overnight courier service. To Aerospatiale: Aerospatiale SNI 59, Route de Verneuil BP 96 78133 Les Mureaux Cedex France Attn.: M. Michel Delaye Mme. Claude Dubreuil, Esq. Fax: 011-331-34-74-95-33 011-331-34-74-95-33 and Aerospatiale SNI c/o Management Liaison Committee Space Systems/Loral, Inc. 3825 Fabian Way M.S.E 49 Palo Alto, CA 94303-4697 Attn. M. Gerard Barkats Fax: (415) 842-7389 with a copy (which shall not constitute notice) to: Hogan & Hartson L.L.P. Columbia Square 555 13th Street, N.W. Washington, D.C. 20004-1109 Attn: Mark E. Mazo, Esq. Fax: 202/637-5910 31 32 To Alcatel: Alcatel Espace 5, rue Noel Pons 92737 Nanterre Cedex France Attn.: M. Pierre de Bayser Arlette Lefeuvre, Esq. Fax: 011-331-46-52-64-60 with a copy (which shall not constitute notice) to: Alcatel Telecom 33, Rue Emeriau 75015 Paris Cedex France Attn.: Marc Jany, Esq. Fax: 011-331-40-58-59-31 and Hogan & Hartson L.L.P. Columbia Square 555 13th Street, N.W. Washington, D.C. 20004-1109 Attn.: Mark E. Mazo, Esq. Fax: 202/637-5910 To Finmeccanica: Finmeccanica S.p.A. Via Saccomuro, 24 00131 Roma Italy Attn.: Alfredo Beolchini Stefania Barbieri, Esq. Fax: 011-39-6-4368-4196 and Finmeccanica c/o Management Liaison Committee Space Systems/Loral, Inc. 3825 Fabian Way M.S.E 49 Palo Alto, CA 94303-4697 Attn.: Luciano Saccani Fax: (408) 863-0604 32 33 with a copy (which shall not constitute notice) to: Coudert Brothers 1114 Avenue of the Americas New York, New York 10036 Attn.: Christopher Wells, Esq. Fax: (212) 626-4120 To Loral, LSC Corp., Holdings, or SS/L: Loral Space & Communications Ltd. 600 Third Avenue New York, New York 10016 Attn.: Mr. Michael B. Targoff President and Chief Operating Officer Fax: 212/682-9805 with a copy (which shall not constitute notice) to: Loral Space & Communications Ltd. 600 Third Avenue New York, NY 10016 Attn: Eric Zahler, Esq. Avi Katz, Esq. Fax: 212/338-5350 and Willkie Farr & Gallagher One Citicorp Center 153 East 53rd Street New York, New York 10022 Attn.: Bruce Kraus, Esq. Fax: 212/821-8111 Section 9.8 Inspection. So long as this Agreement shall be in effect, this Agreement and any amendments hereto shall be made available for inspection at the principal office of SS/L by any party hereto and by the cognizant security authorities of DoD. Section 9.9 Governing Law. The corporate law of the State of Delaware shall govern all issues concerning the rights and obligations of SS/L, on the one hand, and the other parties hereto, on the other hand. All other matters concerning the interpretation and construction of this Agreement shall be governed by, interpreted under, and construed in 33 34 accordance with the internal laws of the State of New York applicable to agreements made and to be performed within the State of New York. Section 9.10 Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 9.11 Entire Agreement. This Agreement, together with the Exchange Agreement and the agreements and amendments executed as conditions to closing under the Exchange Agreement constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, written or oral, relating to the subject matter hereof (including without limitation the Term Sheet dated 21 February 1997, among Loral, SS/L, Aerospatiale and Alcatel and the Term Sheet dated 20 February 1997, between Loral, SS/L and Finmeccanica). Section 9.12 Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdictions, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. Section 9.13 Several Liability of Strategic Participants. The obligations of the Strategic Participants hereunder are several and not joint, and nothing in this Agreement shall be construed to impose on any Strategic Participant any liability for any action or failure to act of any other Strategic Participant. Section 9.14 Counterparts. This Agreement may be signed in counterparts, each of which shall constitute an original and which together shall constitute one and the same agreement. Section 9.15 Required Approvals. If approval of this Agreement or any of the transactions contemplated hereby shall be required by any governmental or supra-governmental agency or instrumentality or is considered to be necessary or advisable to all the parties hereto, all parties hereto shall use their best efforts to obtain such approval. If any required approval is not obtained or it becomes clear that such approval will not be granted, any party shall immediately give the other parties hereto notice and the parties hereto shall promptly meet and negotiate in good faith to modify their respective obligations as necessary. Section 9.16 Consistency. (a) In the event of a conflict between this Agreement and the Certificate of Incorporation or By-laws of SS/L, the terms and provisions of this Agreement shall govern. (b) In the event of a conflict between this Agreement and the Security Control Agreement, the terms and provisions of the Security Control Agreement shall govern. 34 35 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth above. LORAL SPACE & COMMUNICATIONS LTD. By: /s/ Michael B. Targoff --------------------------------------- Title: President and Chief Operating Officer LORAL SPACE & COMMUNICATIONS CORPORATION By: /s/ Michael B. Targoff --------------------------------------- Title: President LORAL SPACECOM CORPORATION By: /s/ Michael B. Targoff --------------------------------------- Title: President SPACE SYSTEMS/LORAL, INC. By: /s/ Michael B. Targoff --------------------------------------- Title: Senior Executive Vice President AEROSPATIALE SNI By: /s/ Michel Delaye --------------------------------------- Title: Le Directeur, Aerospatiale Espace & Defense ALCATEL ESPACE By: /s/ Jean Claude Husson --------------------------------------- Title: President and CEO 35 36 FINMECCANICA S.p.A. By: /s/Giuseppe Viriglio --------------------------------------- Title: Head, Space Division 36 EX-10.3 4 REGISTRATION RIGHTS AGREEMENT (SERIES C PREFERRED) 1 Exhibit 10.3 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT dated as of June 23, 1997 (this "Agreement") among LORAL SPACE & COMMUNICATIONS LTD., a Bermuda company (the "Company"), AEROSPATIALE SNI, a societe nationale industrielle organized under the laws of France ("Aerospatiale"), and ALCATEL ESPACE, a societe anonyme organized under the laws of France ("Alcatel" and, together with Aerospatiale, the "Strategic Participants"). ARTICLE I DEFINITIONS SECTION 1.1. Definitions. The following terms shall have the meanings ascribed to them below: "Affiliate", as applied to any Person, shall mean any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purpose of this definition "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person whether through the ownership of voting securities, by contract or otherwise. "Board of Directors" means the Board of Directors of the Company. "Business Day" means each day other than Saturdays, Sundays and days when commercial banks are authorized to be closed for business in New York, New York. "Commission" means the Securities and Exchange Commission. "Common Stock" means the Common Stock, par value $.01 per share, of the Company transferred to the Strategic Participants pursuant to the Exchange Agreement, dated as of June 18, 1997, by and among the Company and the Strategic Participants. "Company" has the meaning set forth in the preamble of this Agreement. "Demand Offering" has the meaning set forth in Section 2.1(c). "Excess Amount" means the number of Registrable Securities requested by an SP Holder or SP Holders to be sold pursuant to Section 2.1(c) or 2.2 which the managing Underwriter or Underwriters determines exceeds the largest number of Registrable Securities which can successfully be sold in an orderly manner in such offering within a price range acceptable to the Company. "Exchange Act" means the Securities Exchange Act of 1934, as amended. 2 "Holder" means each of the Strategic Participants for so long as it owns any Registrable Securities, and such of its respective successors or assigns who acquire Registrable Securities, directly or indirectly, from the Strategic Participants, in each case for so long as such successors or assigns own any Registrable Securities. "Market Price" means with respect to any Registrable Security on any date, (i) the last reported sale price of the Registrable Security on the principal national securities exchange on which the class of Registrable Securities is listed or admitted to trading or, if no such reported sale takes place on any such day, the average of the closing bid and asked prices thereon, as reported in The Wall Street Journal, or (ii) if such Registrable Security is not listed or admitted to trading on a national securities exchange, the last reported sales price on the NASDAQ National Market System or, if no such reported sale takes place on any such day, the average of the closing bid and asked prices thereon, as reported in The Wall Street Journal, or (iii) if such Registrable Security is not quoted on such National Market System nor listed or admitted to trading on a national exchange, then the average of the closing bid and asked prices, as reported by The Wall Street Journal for the over-the-counter market, or (iv) if there is no public market for such Registrable Security, the fair market value of a share of such Registrable Security as determined by a nationally recognized investment bank ("SP Investment Bank") selected by one or both Strategic Participants, as applicable, and a nationally recognized investment bank selected by the Company or, if such investment banks are not able to agree, by a third nationally recognized investment bank selected jointly by the SP Investment Bank and the investment bank selected by the Company. All fees and expenses of such investment banks (including the SP Investment Bank) shall be paid by the Company. "Other Holder Notice" shall have the meaning set forth in Section 2.1(c). "Person" means an individual or a corporation partnership, limited liability company, trust, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Piggy-Back Offering" has the meaning set forth in Section 2.2. "Registrable Security" means any share of Common Stock issued and delivered to the Strategic Participants pursuant to the Exchange Agreement, dated as of June 18, 1997, among the Company and the Strategic Participants, until (i) it has been disposed of pursuant to the Shelf Registration Statement, (ii) it is sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met or it may be sold pursuant to Rule 144(k) or (iii) it has been otherwise transferred, the Company has delivered a new certificate or other evidence of ownership for it not bearing the legend required pursuant to this Agreement and it may be resold without subsequent registration under the Securities Act. "Requisite Share Number" means a number of Registrable Securities equal, in the case of Aerospatiale, to not less than 2,925,000 shares of Common Stock and, in the case of Alcatel, to not less than 3,150,000 shares of Common Stock (as adjusted from time to time to -2- 3 reflect stock splits, stock dividends, recapitalizations and similar transactions), or such lesser number as constitutes all shares of Common Stock then held by SP Holders in the aggregate. "Securities Act" shall mean the Securities Act of 1933, as amended. "Shelf Registration" means the registration effected pursuant to the Shelf Registration Statement. "Shelf Registration Statement" means the registration statement of the Company, on Form S-3, filed with the Commission on May 5, 1997 with respect to the Registrable Securities and other Loral securities (Registration No. 333-26517), and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "SP Holders" means the specific Strategic Participant that is requesting a Demand Offering, together with each of such Strategic Participant's Transferees, and, as applicable, any of the other Strategic Participant and its Transferees that decide pursuant to Section 2.1(c) to participate in such Demand Offering. "Strategic Participants" shall have the meaning set forth in the preamble of this Agreement. "Trading Day" means with respect to any securities exchange or securities market, each Monday, Tuesday, Wednesday, Thursday and Friday other than any day on which securities are not traded on the applicable securities exchange or in the applicable securities market. "Transferee" means each of a Strategic Participant's successors or assigns who acquire Registrable Securities, directly or indirectly, from such Strategic Participant, in each case for so long as such successors or assigns own any Registrable Securities. "Underwriter" means a securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer's market-making activities. "Withdrawal Election" means a Withdrawal Election as defined in Section 2.3. ARTICLE II REGISTRATION RIGHTS SECTION 2.1. (a) Shelf Registration. The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders until the earlier of (i) the date as of which the Registrable Securities shall not constitute restricted securities under Rule 144(k) of the Securities Act or (ii) the date as of which all the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (in any such -3- 4 case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if, among other things, it voluntarily takes any action that would result in Holders of Registrable Securities covered thereby not to be able to offer and sell such Registrable Securities during that period, unless such action is (A) required by applicable law or (B) pursuant to Section 2.1(b) hereof, and in either case, so long as the Company promptly thereafter complies with the requirements of Section 3.1(e) hereof, if applicable. (b) The Company may suspend the use of the Prospectus for a period not to exceed fifteen (15) days (or such longer period as is reasonably necessary under the circumstances) in any three (3) month period for valid business reasons (not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets, public filings with the Commission, pending corporate developments and similar events. (c) Demand for Underwritten Offering. At any time on or after the date hereof, if a Strategic Participant so requests, the offering of Registrable Securities pursuant to the Shelf Registration shall be in the form of an underwritten offering ("Demand Offering"), provided that such Strategic Participant (or any Transferee to whom such Strategic Participant has transferred its right to request a Demand Offering), makes such request in writing on behalf of SP Holders owning, individually or in the aggregate, at least the Requisite Share Number and provided further that each Strategic Participant and its Transferees may request a Demand Offering no more than once in the aggregate. Such written request will specify the number of shares of Registrable Securities proposed to be sold. The Company shall give written notice of such request for a Demand Offering within 10 days after the receipt thereof to all other Strategic Participants and their Transferees. Within 20 days after receipt of such notice by any Strategic Participant and its Transferees, any of such Holders may request in writing that Registrable Securities be included in the Demand Offering and the Company shall include in the Demand Offering the Registrable Securities of any such Holder requested to be so included. Each such request by such other Holders (each, an "Other Holder Notice") shall specify the number of shares of Registrable Securities proposed to be sold. Notwithstanding anything to the contrary herein, unless the Strategic Participant making the request for a Demand Offering shall consent in writing, no other party, including the Company, shall be permitted to offer securities under any such Demand Offering, provided that such consent may not be unreasonably withheld. In connection with a Demand Offering, a nationally recognized underwriter selected by the Company and reasonably acceptable to the Strategic Participant requesting the Demand Offering shall act as the book-running managing Underwriter and the Company may select one or more nationally recognized firms of investment bankers to act as co-manager or managers, if any. (d) Notice of Demand Offering. Upon receipt of a written request for a Demand Offering in accordance with Section 2.1(c) and receipt of any Other Holder Notices, the Company shall be entitled to deliver a notice (a "Purchase Notice") to the SP Holders requesting inclusion of Registrable Securities in the Demand Offering within 10 days of the date by which all Other Holder Notices must have been delivered indicating that the Company intends to purchase all or some portion of the Registrable Securities to be included in the Demand Offering. The Purchase Notice shall set forth the number of shares of Registrable Securities to be -4- 5 purchased; provided that, if the Company elects to purchase less than all of the Registrable Securities to be included in the Demand Offering, the SP Holders shall be entitled to retain, and not to sell to the Company pursuant to this Section 2.1(d), a number of such Registrable Securities equal to the Requisite Share Number. The delivery of the Purchase Notice shall constitute a binding contract among the Company and the SP Holders seeking to include Registrable Securities in the Demand Offering to consummate the purchase and sale transaction contemplated by the Purchase Notice on the terms set forth in this Section 2.1(d). (i) The per share purchase price for any such purchase shall be the Market Price for the Registrable Securities on the Trading Day immediately preceding the delivery of the written request for the Demand Offering less the underwriting fees, discounts and commissions (together, the "Underwriting Spread") that would have been applicable to such Registrable Securities, taking into account the contemplated manner of distribution, had such Registrable Securities been included in the Demand Offering. (ii) The closing shall be held at 10:00 A.M., local time, on the earlier of (A) the closing of the Demand Offering and (B) third Business Day after a determination not to proceed with the Demand Offering, at the principal office of the Company, or at such other time or place as the parties mutually agree. (iii) On the closing date, each selling SP Holder shall deliver (i) certificates representing the shares being sold, free and clear of any lien, claim or encumbrance, and (ii) such other documents, including evidence of ownership and authority, as the Company may reasonably request. The purchase price shall be paid by wire transfer of immediately available funds no later than 2:00 P.M. on the closing date. SECTION 2.2. Piggy-Back Offering. If at any time the Company, for its own account or for the account of any of its securityholders, proposes to offer the Company's Common Stock, par value $.01 per share, in the form of an underwritten offering (other than with respect to a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the Commission) or a registration statement filed in connection with an exchange offer or offering of securities solely to the Company's existing securityholders), then the Company shall give written notice of such proposed underwritten offering to Holders as soon as practicable (but in no event later than the anticipated filing date), and such notice shall offer such Holders the opportunity to include in such underwritten offering such number of shares of Registrable Securities as each such Holder may request (which request shall specify the number of shares of Registrable Securities intended to be disposed of by such Holder) (a "Piggy-Back Offering"). The Company shall use its reasonable best efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Offering to be included on the same terms and conditions as any similar securities of the Company included therein to permit the sale or other disposition of such Registrable Securities in accordance with the intended method of distribution thereof. Notwithstanding the foregoing, Holders shall not be entitled to a Piggy- -5- 6 Back Offering in connection with any underwritten offering granted by the Company to a third party pursuant to a contractual obligation if the agreement between such third party and the Company providing for such underwritten offering prohibits the Company from granting to other Persons the right to "piggy-back" on to such underwritten offering; provided that in such event, the Company shall provide Holders notice of such prohibition prior to the anticipated filing date of such registration so as to permit Holders to seek permission from such third party to include Registrable Securities in such underwritten offering. SECTION 2.3. Reduction of Offering. Notwithstanding anything contained herein, if the managing Underwriter or Underwriters of an offering described in Section 2.1(c) or 2.2 deliver a written opinion to the Holders of the Registrable Securities requesting inclusion in such offering that (i) the size of the offering that the Holders, the Company and/or such other Persons intend to make or (ii) the kind of securities that the Holders, the Company and/or any other Persons intend to include in such offering is such that the success of the offering would be materially and adversely affected by inclusion of the Registrable Securities requested to be included, then (A) if the size of the offering is the basis of such Underwriter's or Underwriters' opinion, the Company shall not include an amount of Registrable Securities requested to be included in such offering by all Holders equal to the Excess Amount (such reduction in connection with a Demand Offering to be allocated, first, pro rata among Holders requesting inclusion of Registrable Securities in the Demand Offering pursuant to Other Holder Notices, according to the number of Registrable Securities requested by such Holders for inclusion, and then, and only to the extent any portion of the Excess Amount remains unallocated, pro rata among the remaining Holders requesting inclusion of Registrable Securities in the Demand Offering); provided that, in the case of a Piggy-Back Offering, if securities are being offered for the account of other Persons as well as the Company, then with respect to the Registrable Securities intended to be offered by Holders, the proportion by which the amount of such class of securities intended to be offered by Holders is reduced shall not exceed the proportion by which the amount of such class of securities intended to be offered by such other Persons is reduced (it being understood that such reduction may be all of such class of securities); and (B) if the combination of securities to be offered is the basis of such Underwriter's or Underwriters' opinion, (x) the Registrable Securities to be included in such offering shall be reduced as described in clause (A) above (subject to the proviso in clause (A)) or, (y) if the actions described in clause (B)(x) would, in the judgment of the managing Underwriter or Underwriters, be insufficient to substantially eliminate the adverse effect that inclusion of the Registrable Securities requested to be included would have on such offering, such Registrable Securities will be excluded from such offering. If, as a result of the proration provisions of this Section 2.3, any Holder shall not be entitled to include all Registrable Securities in a Demand Offering or Piggy-Back Offering that such Holder has requested to be included, such Holder may elect to withdraw his request to include Registrable Securities in such offering (a "Withdrawal Election"); provided, however, that a Withdrawal Election shall be irrevocable and, after making a Withdrawal Election, a Holder shall no longer have any right to include Registrable Securities in the offering as to which such Withdrawal Election was made. -6- 7 ARTICLE III DEMAND OFFERING PROCEDURES SECTION 3.1. In connection with any Demand Offering and any amendment or supplement to the Shelf Registration Statement relating thereto, the following provisions shall apply: (a) The Company shall, prior to filing any amendment or supplement to the Shelf Registration Statement or Prospectus, furnish to each Holder, one counsel representing all Holders, and each Underwriter, if any, of the Securities covered by such Shelf Registration Statement, Prospectus or amendment or supplement thereto, a copy of such amendment or supplement thereto, and shall use its reasonable best efforts to reflect in each such amendment or supplement, when so filed with the Commission, such comments as such Holders may reasonably propose. The Company shall furnish to each Holder of Securities included within the coverage of the Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits (including those incorporated by reference). The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request. (b) The Company shall ensure that (i) the Shelf Registration Statement, and any amendment thereto, and any Prospectus forming part thereof and any amendment or supplement thereto, complies in all material respects with the Securities Act, (ii) the Shelf Registration Statement and any amendment thereto does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of the Shelf Registration Statement, and any amendment or supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (c) The Company shall use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of the Shelf Registration Statement at the earliest possible time. (d) The Company will promptly notify each Holder of Registrable Securities covered by the Shelf Registration Statement of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (e) The Company will use its best efforts to (i) register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions in the -7- 8 United States as any Holder reasonably (in light of such Holder's intended plan of distribution) request and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities in the United States as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Holder to consummate the disposition of the Registrable Securities owned by such Holder; provided that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction. (f) The Company will immediately notify each Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly make available to each Holder any such supplement or amendment. (g) The Company will enter into customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities (the Holders may, at their option, require that any or all of the representations, warranties and covenants of the Company to or for the benefit of such Underwriters also be made to and for the benefit of such Holders). (h) The Chairman of the Board of Directors of the Company, the Chief Executive Officer of the Company and other members of the management of the Company will cooperate fully in any offering of Registrable Securities hereunder, including, without limitation, participation in meetings with potential investors and preparation of all materials for such investors. (i) The Company will deliver promptly to each Holder of such Registrable Securities and each Underwriter, if any, subject to restrictions imposed by the United States federal government or any agency or instrumentality thereof, copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the Shelf Registration Statement and make available for inspection by any Holder of such Registrable Securities, any Underwriter participating in any disposition pursuant to such Shelf Registration Statement and any attorney, accountant or other professional retained by any such Holder or Underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records"), subject to restrictions imposed by any governmental authority governing access to classified information, as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information reasonably requested by any Inspectors in connection -8- 9 with the Shelf Registration Statement. Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in the Shelf Registration Statement or (ii) the disclosure or release of such Records is requested or required pursuant to oral questions, interrogatories, requests for information or documents or a subpoena or other order from a court of competent jurisdiction or other process; provided that prior to any disclosure or release pursuant to clause (ii), the Inspectors shall provide the Company with prompt notice of any such request or requirement so that the Company may seek an appropriate protective order or waive such Inspectors' obligation not to disclose such Records; and provided, further, that if failing the entry of a protective order or the waiver by the Company permitting the disclosure or release of such Records, the Inspectors, upon advice of counsel, are compelled to disclose such Records, the Inspectors may disclose that portion of the Records which counsel has advised the Inspectors that the Inspectors are compelled to disclose. Each Holder of such Registrable Securities agrees that information obtained by it solely as a result of such inspections (not including any information obtained from a third party who, insofar as is known to the Holder after reasonable inquiry, is not prohibited from providing such information by a contractual, legal or fiduciary obligation to the Company) shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company or its Affiliates unless and until such is made generally available to the public. Each Holder of such Registrable Securities further agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential. (j) The Company will furnish to each Holder and to each Underwriter, if any, a signed counterpart, addressed to such Holder or Underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) a comfort letter or comfort letters from the Company's independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the Holders of Registrable Securities included in such offering or the managing Underwriter therefor reasonably requests. (k) The Company will otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its securityholders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of the Shelf Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act. (l) The Company will use its best efforts to cause all such Registrable Securities to be listed on each national securities exchange on which similar securities issued by the Company are then listed (if any), if the listing of such Registrable Securities is then permitted under the rules of such exchange. (m) The Company shall have appointed a transfer agent and registrar for all Registrable Securities by the date hereof. -9- 10 The Company may require each Holder of Registrable Securities to promptly furnish in writing to the Company such information regarding the distribution of the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required in connection with the Shelf Registration. Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.1(f) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Shelf Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3.1(f) hereof, and, if so directed by the Company, such Holder will deliver to the Company all copies, other than permanent file copies then in such Holder's possession, of the most recent Prospectus at the time of receipt of such notice. SECTION 3.2. Registration Expenses. In connection with the Shelf Registration pursuant to Section 2.1(a) hereof, and any registration statement filed pursuant to Sections 2.1(c) or 2.2 hereof, the Company shall pay the following registration expenses incurred in connection with the registration hereunder (the "Registration Expenses"): (i) all registration and filing fees, (ii) fees and expenses of compliance with securities or blue sky laws (including fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, (iv) the Company's internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses incurred in connection with the listing of the Registrable Securities, (vi) fees and disbursements of counsel for the Company and fees and expenses for independent certified public accountants retained by the Company (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters requested pursuant to Section 3.1(j) hereof), (vii) the fees and expenses of any special experts retained by the Company in connection with such registration, and (viii) reasonable fees and expenses of one counsel (who shall be reasonably acceptable to the Company) for the Holders. The Company shall have no obligation to pay any underwriting fees, discounts or commissions attributable to the sale of Registrable Securities, or any out-of-pocket expenses of the Holders (or the agents who manage their accounts). ARTICLE IV INDEMNIFICATION AND CONTRIBUTION SECTION 4.1. Indemnification by the Company. The Company agrees to indemnify and hold harmless each Holder of Registrable Securities, its officers, directors and agents, and each Person, if any, who controls such Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any loss, claim, damage or liability and any action in respect thereof to which such Holder, its officers, directors and agents, and any such controlling Person may become subject under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities (as amended or supplemented if the Company -10- 11 shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or arises out of, or is based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse each Holder, its officers, directors and agents, and each such controlling Person for any legal and other expenses reasonably incurred by that Holder, its officers, directors and agents, or any such controlling person in investigating or defending or preparing to defend against any such loss, claim, damage, liability or action. The Company also agrees to indemnify any Underwriters of the Registrable Securities, their officers and directors and each Person who controls such Underwriters on substantially the same basis as that of the indemnification of the Holders provided in this Section 4.1. SECTION 4.2. Indemnification by Holders of Registrable Securities. Each Holder agrees, severally but not jointly, to indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Holder, but only with reference to information related to such Holder furnished in writing by such Holder or on such Holder's behalf expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. In case any action or proceeding shall be brought against the Company or its officers, directors or agents or any such controlling Person, in respect of which indemnity may be sought against such Holder, such Holder shall have the rights and duties given to the Company, and the Company or its officers, directors or agents or such controlling Person shall have the rights and duties given to such Holder, by the preceding paragraph. Each Holder also agrees to indemnify and hold harmless Underwriters of the Registrable Securities, their officers and directors and each Person who controls such Underwriters on substantially the same basis as that of the indemnification of the Company provided in this Section 4.2. SECTION 4.3. Conduct of Indemnification Proceedings. Promptly after receipt by any person in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2 (an "Indemnified Party") of notice of any claim or the commencement of any action, the Indemnified Party shall, if a claim in respect thereof is to be made against the person against whom such indemnity may be sought (an "Indemnifying Party") notify the Indemnifying Party in writing of the claim or the commencement of such action provided that the failure to notify the Indemnifying Party shall not relieve it from any liability which it may have to an Indemnified Party otherwise than under Section 4.1 or 4.2 and except to the extent of any actual prejudice resulting therefrom. If any such claim or action shall be brought against an Indemnified Party, and it shall notify the Indemnifying Party thereof, the Indemnifying Party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified Indemnifying Party, to assume the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided that the Indemnified Party shall have the right to employ separate counsel to represent -11- 12 the Indemnified Party and its controlling Persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, but the fees and expenses of such counsel shall be for the account of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) in the reasonable judgment of such Indemnified Party representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding. SECTION 4.4. Contribution. If the indemnification provided for in this Article 4 is unavailable to the Indemnified Parties in respect of any losses, claims, damages or liabilities referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) as between the Company and the Holders on the one hand and the Underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and the Holders on the one hand and the Underwriters on the other from the offering of the Registrable Securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and the Holders on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations and (ii) as between the Company on the one hand and each Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of each Holder in connection with such statements or omissions, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Holders on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and the Holders bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of the Company and the Holders on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Holders or by the Underwriters. The relative fault of the Company on the one hand and of each Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation (even if the -12- 13 Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such Holder were offered to the public (less underwriting discounts and commissions) exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Each Holder's obligations to contribute pursuant to this Section 4.4 are several in proportion to the proceeds of the offering received by such Holder bears to the total proceeds of the offering received by all the Holders and not joint. ARTICLE V CERTAIN AGREEMENTS SECTION 5.1. Participation in Underwritten Registrations. No Holder may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and these Registration Rights; provided that (i) any Holder participating in such registration will not be required to make any representations or warranties except those which relate solely to such Holder and its intended method of distribution and (ii) the liability of each such Holder to any Underwriter under such underwriting agreement will be limited to liability arising from misstatements or omissions regarding such Holder and its intended method of distribution and any such liability shall not exceed an amount equal to the amount of net proceeds such Holder derives from such registration. The Company shall take all reasonable steps to ensure that the shares of Registrable Securities sold in any underwritten public offering shall be widely disseminated. SECTION 5.2. Rule 144. The Company covenants that it will file any reports required to be filed by it under the Securities Act and the Exchange Act and that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 or Rule 144A under the -13- 14 Securities Act, as such Rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. SECTION 5.3. Holdback Agreements. To the extent not inconsistent with applicable law, each Holder of Registrable Securities agrees not to effect any sale or distribution of the issue being registered or of a similar security of the Company, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 or Rule 144A under the Securities Act, during the l4 days prior to, and during the 90-day period beginning on, the effective date of the registration statement filed by the Company (except as part of such registration) if, and to the extent, requested by the managing Underwriter or Underwriters in the case of any underwritten public offering. ARTICLE VI MISCELLANEOUS SECTION 6.1. Legends. (a) Subject to Section 6.1(b), each certificate evidencing Common Stock that is issued to any Holder shall bear a legend in substantially the following form: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. (b) If any Common Stock shall be transferred pursuant to an effective registration statement or Rule 144 (or any similar rule then in effect) under the Securities Act, or if in the opinion of the Company the Common Stock shall otherwise not be subject to any restrictions on transfer under the Securities Act, the Company shall, upon the written request of any Holder, issue to such Holder a new certificate evidencing such Common Stock without the legend set forth above endorsed thereon. SECTION 6.2. Remedies. The Company and the Strategic Participants acknowledge and agree that in the event of any breach of this Agreement by any one of them, the Company or the appropriate Strategic Participants, as the case may be, would be irreparably harmed and could not be made whole by monetary damages. The Company and the Strategic Participants accordingly agree (i) to waive the defense in any action for specific performance that a remedy at law would be adequate, and (ii) that the Company and the Strategic Participants, in addition to any other remedy to which they may be entitled at law or in equity, shall be entitled to compel specific performance of this Agreement in any action instituted in the United States District Court for the Southern District of New York, or, in the event said Court would not have jurisdiction for such action, in any court of the United States or any state thereof having subject matter jurisdiction for such action. The Company and the Strategic Participants consent to non- -14- 15 exclusive personal jurisdiction in any such action brought in the United States District Court of the Southern District of New York, or any such other court. SECTION 6.3. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, and their respective successors and assigns; provided that neither this Agreement nor any rights or obligations hereunder may be transferred or assigned by the Company. SECTION 6.4. No Waivers; Amendments. (a) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. (b) This Agreement may not be amended, modified or supplemented other than by a written instrument signed by each party hereto. (c) Any provision of this Agreement may be waived if, but only if, such waiver is in writing and is signed by the party against whom the enforcement of such waiver is sought. SECTION 6.5. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopier or similar writing) and shall be given to such party at its address or telecopier number set forth below, or such other address or telecopier number as such party may hereinafter specify for the purpose to the party giving such notice. Each such notice, request or other communication shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section and the appropriate answerback, if applicable, is received or (ii) if given by any other means, when delivered at the address specified in this Section 6.5. Notices to the Company shall be addressed to Loral Space & Communications Ltd., 600 Third Avenue, New York, New York 10016, Attention: Eric J. Zahler, Vice President, General Counsel and Secretary (telecopier no. (212) 682-9805) with a copy thereof to Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York 10022-4669, Attention: Bruce Kraus, Esq. (telecopier no. (212) 821-8111); notices to Aerospatiale shall be addressed to Aerospatiale SNI, 59, Route de Verneuil BP 96, 78133 Les Mureaux Cedex, France, Attention: Michel Delaye (telecopier no. 011-331-34-74-95-33), with a copy thereof (which shall not constitute notice) to Aerospatiale SNI, c/o Management Liaison Committee, Space Systems/Loral, Inc., 3825 Fabian Way, M.S.E. 49, Palo Alto, CA 94303-4697, Attention: Gerard Barkats (telecopier no. (415) 842-7389), and with a copy thereof (which shall not constitute notice) to Hogan & Hartson L.L.P., Columbia Square, 555 13th Street, N.W., Washington, D.C. 20004-1109, Attention: Mark E. Mazo, Esq. (telecopier no. (202) 637-5910); and notices to Alcatel shall be addressed to Alcatel Espace, 5, rue Noel Pons, 92737 Nanterre Cedex, France, Attention: Pierre de Bayser (telecopier no. 011-331-46-52-64-60), with a copy thereof (which shall not constitute notice) to Alcatel N.V. 33, Rue Emeriau, 75015 Paris Cedex, France, -15- 16 Attention: Marc Jany, Esq. (telecopier no. 011-331-40-58-59-31, and with a copy thereof (which shall not constitute notice) to Hogan & Hartson L.L.P., as detailed above. SECTION 6.6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 6.7. Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. SECTION 6.8. Entire Agreement. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, written or oral, relating to the subject matter hereof. SECTION 6.9. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdictions, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. SECTION 6.10. Counterparts. This Agreement may be signed in counterparts, each of which shall constitute an original and which together shall constitute one and the same agreement. -16- 17 IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement as of the date set forth above. LORAL SPACE & COMMUNICATIONS LTD. By: /s/ Michael B. Targoff -------------------------------------------- Name: Michael B. Targoff Title: President and Chief Operating Officer AEROSPATIALE SNI By: /s/ Michel Delaye -------------------------------------------- Name: Michel Delaye Title: Le Directeur, Aerospatial Espace & Defense ALCATEL ESPACE By: /s/ Jean Claude Husson -------------------------------------------- Name: Jean Claude Husson Title: President and CEO -17- EX-10.4 5 REGISTRATION RIGHTS AGREEMENT (COMMON STOCK) 1 EXHIBIT 10.4 LORAL SPACE & COMMUNICATIONS LTD. $400,000,000 6% Convertible Preferred Equivalent Obligations due 2006 REGISTRATION RIGHTS AGREEMENT New York, New York March 31, 1997 Finmeccanica S.p.A. Piazza Monte Grappa 4 00195 Rome ITALY Aerospatiale Societe Nationale Industrielle 100 BD Du Midi Cannes La Bocca Cedex FRANCE Alcatel Espace 11 Avenue Dubonnet 924047 Courbevoie Cedex FRANCE and such other Initial Purchasers who execute this Agreement Dear Sirs: Loral Space & Communications Ltd., a Bermuda company (the "Company"), proposes to issue and sell to Finmeccanica S.p.A. ("Finmeccanica"), Alcatel Espace ("Alcatel"), Aerospatiale Societe Nationale Industrielle ("Aerospatiale") and such other initial purchasers as the Company shall designate from time to time (the "Initial Purchasers"), up to $400,000,000 aggregate principal amount of its 6% Convertible Preferred Equivalent Obligations due 2006 (the "CPEOs"). The CPEOs will be convertible into shares of Common Stock, $.01 par value per share, of the Company (the "Common Stock") at the conversion price set forth therein and, upon receipt of shareholder approval, be mandatorily exchangeable for shares of the Company's 6% Series C Convertible Redeemable Preferred Stock, par value 2 2 $.01 per share (the "Preferred Shares"), having an aggregate liquidation preference equal to the aggregate principal amount of the CPEOs outstanding at the time of such exchange. For purposes of this Agreement, the term "Securities" shall refer to the CPEOs until and unless shareholder approval shall have been secured for the issuance of the Preferred Shares, in which case, upon the issuance of the Preferred Shares in exchange for the CPEOs, the term "Securities" shall refer to such Preferred Shares. The CPEOs will be issued and sold to Finmeccanica upon the terms set forth in the Transaction Agreement dated as of March 20, 1997, between the Company and Finmeccanica, and to such other Initial Purchasers upon the terms set forth in such other agreements as may be entered into from time to time between the Company and each of the Initial Purchasers (collectively the "Purchase Agreements"), each of which constituting a separate agreement enforceable by the parties thereto independently of the terms of any other Purchase Agreement. In satisfaction of a condition to the obligations of each Initial Purchaser under any Purchase Agreement to which it is a party, the Company agrees with each Initial Purchaser (i) for the benefit of each Initial Purchaser and (ii) for the benefit of any subsequent holders of the Securities or the shares of Common Stock issuable upon conversion of the Securities (including any Initial Purchaser) from time to time until such time as such Securities shall no longer constitute restricted securities pursuant to Rule 144(k) of the Securities Act (as defined herein) or all such Securities and shares of Common Stock issued upon conversion of such Securities have been sold pursuant to the Shelf Registration Statement (as defined below) (each of the foregoing a "Holder" and together the "Holders"), as follows: 1. Definitions. Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Act" means the Securities Act of 1933, as from time to time amended, and the rules and regulations of the Commission promulgated thereunder. "Affiliate" of any specified person means any other person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to 3 3 the foregoing. "Commission" means the Securities and Exchange Commission. "CPEOs" has the meaning set forth in the preamble hereto. "Exchange Act" means the Securities Exchange Act of 1934, as from time to time amended, and the rules and regulations of the Commission promulgated thereunder. "Holder" has the meaning set forth in the preamble hereto. "Incorporated Document" means filings made by the Company with the Commission pursuant to Section 13, 14 or 15 of the Exchange Act. "Indenture" means the indenture, dated as of February 1, 1997, relating to the CPEOs between the Company and The Bank of New York, as trustee, as the same may be amended from time to time in accordance with the terms thereof. "Majority Holders" means the Holders of a majority of the aggregate principal amount or liquidation preference, as the case may be, of Securities registered under a Shelf Registration Statement; provided, however, that Holders of Common Stock issued upon conversion of Securities shall be deemed to be Holders of the aggregate principal amount or liquidation preference, as the case may be, of Securities from which such Common Stock was converted. "Managing Underwriters" means the investment banker or investment bankers and manager or managers that shall administer an underwritten offering of the securities covered by the Shelf Registration Statement. "Preferred Shares" has the meaning set forth in the preamble hereto. "Prospectus" means the prospectus included in any Shelf Registration Statement (including a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Securities or Common Stock issuable upon conversion thereof covered by such Shelf Registration Statement, and all amendments and supplements to the Prospectus, including post-effective amendments. 4 4 "Securities" has the meaning set forth in the preamble hereto. "Shelf Registration Period" has the meaning set forth in Section 2(b) hereof. "Shelf Registration Statement" means a "shelf" registration statement of the Company pursuant to the provisions of Section 2 hereof which covers some or all of the Securities and the Common Stock issuable upon conversion thereof, as applicable, on an appropriate form under Rule 415 under the Act or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Trustee" means the trustee with respect to the Securities under the Indenture. "underwriter" means any underwriter of Securities or Common Stock issuable upon conversion thereof in connection with an offering thereof under a Shelf Registration Statement. 2. Shelf Registration; Suspension of Use of Prospectus. (a) The Company shall prepare and, not later than May 5, 1997, shall file with the Commission and shall use its reasonable best efforts to cause to be declared effective under the Act thereafter, but no later than July 4, 1997, a Shelf Registration Statement relating to the offer and sale of the Securities and the shares of Common Stock issuable upon conversion thereof by the Holders from time to time in accordance with the methods of distribution elected by such Holders and set forth in such Shelf Registration Statement. In furtherance of the foregoing, it is hereby acknowledged and agreed that upon the issuance of the Preferred Shares upon mandatory exchange as provided in the Indenture or upon sale pursuant to a Purchase Agreement, the Company shall take such steps as may be appropriate to ensure that any then current Shelf Registration Statement is amended, or a new Shelf Registration Statement is filed and promptly declared effective in accordance with the time limits in the first sentence of this Section 2(a), such that the Preferred Shares may be offered and sold by the Holders thereof from time to time to the same extent as the CPEOs immediately prior to such mandatory exchange. The sole and exclusive remedy available to the Holders in the event that a Shelf Registration Statement is not filed or declared 5 5 effective within the time periods specified in this Section 2(a) is the collection of additional interest or dividends, as the case may be, in accordance with the terms of the Securities. (b) The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders until such date as of which neither the Securities nor the shares of Common Stock issuable upon conversion thereof shall constitute restricted securities under Rule 144(k) of the Securities Act or until all the Securities and the shares of Common Stock issuable upon conversion thereof covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (in any such case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of securities covered thereby not to be able to offer and sell such securities during that period, unless such action is (i) required by applicable law or (ii) pursuant to Section 2(c) hereof, and, in either case, so long as the Company promptly thereafter complies with the requirements of Section 3(i) hereof, if applicable. (c) The Company may suspend the use of the Prospectus for a period not to exceed 15 days (or such longer period as is reasonably necessary under the circumstances) in any three month period for valid business reasons (not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets, public filings with the Commission, pending corporate developments and similar events. 3. Registration Procedures. In connection with any Shelf Registration Statement, the following provisions shall apply: (a) The Company shall furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of any Shelf Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein and shall use its best efforts to reflect in each such document, when so filed with the Commission, such comments as the Initial Purchasers reasonably may propose; provided, however, that the Company shall be required only to furnish an Incorporated Document to any Initial Purchaser as promptly as practicable following its filing with the Commission. 6 6 (b) The Company shall ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto complies in all material respects with the Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any amendment or supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (c) (1) The Company shall advise the Initial Purchasers and the Holders and, if requested by any such Initial Purchaser or any such Holder, confirm such advice in writing: (i) when a Shelf Registration Statement and any amendment thereto has been filed with the Commission and when the Shelf Registration Statement or any post-effective amendment thereto has become effective; and (ii) of any request by the Commission for amendments or supplements to the Shelf Registration Statement or the Prospectus included therein or for additional information. (2) The Company shall advise the Initial Purchasers and the Holders (and, if requested by any such Initial Purchaser or any such Holder, confirm such advice in writing): (i) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for that purpose; (ii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included in any Shelf Registration Statement for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (iii) of the suspension of the use of the Prospectus pursuant to Section 2(c) hereof or of 7 7 the happening of any event that requires the making of any changes in the Shelf Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading (which advice shall be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made); provided that such notice shall not be required to specify the nature of the event giving rise to the notice requirement hereunder. (d) The Company shall use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of any Shelf Registration Statement at the earliest possible time. (e) The Company shall furnish to each Holder of securities included within the coverage of any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits (including those incorporated by reference). (f) The Company shall, during the Shelf Registration Period, deliver to each Holder of securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of securities in connection with the offering and sale of the securities covered by the Prospectus or any amendment or supplement thereto. (g) Prior to any offering of securities pursuant to any Shelf Registration Statement, the Company shall register or qualify or cooperate with the Holders of securities included therein and their respective counsel in connection with the registration or qualification of such securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holders reasonably request in writing and do any and all other acts or things reasonably necessary or advisable to enable the offer 8 8 and sale in such jurisdictions of the securities covered by such Shelf Registration Statement; provided, however, that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (h) The Company shall cooperate with the Holders of Securities or the shares of Common Stock issued upon conversion thereof to facilitate the timely preparation and delivery of certificates representing Securities or the Common Stock issued upon conversion thereof to be sold pursuant to any Shelf Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request prior to sales of securities pursuant to such Shelf Registration Statement. (i) Upon the occurrence of any event contemplated by paragraph (c)(2)(iii) above, the Company shall, if required pursuant to the Act or paragraph (c)(2)(iii) above, as promptly as practicable prepare a post-effective amendment to any Shelf Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to purchasers of the securities included therein, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (j) Not later than the effective date of any Shelf Registration Statement hereunder, the Company shall provide a CUSIP number for the Securities registered under such Shelf Registration Statement, and provide the Trustee or transfer agent, as the case may be, with printed certificates for such Securities, in a form eligible for deposit with The Depository Trust Company. (k) The Company shall use its best efforts to comply with all applicable rules and regulations of the Commission and shall make generally available to its security holders as soon as practicable after the effective date of the applicable Shelf Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Act. (1) The Company shall cause the Indenture to be qualified under the Trust Indenture Act in a timely 9 9 manner. (m) The Company may require each Holder of securities to be sold pursuant to any Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of such securities as the Company may from time to time reasonably require for inclusion in such Shelf Registration Statement. Any Holder who fails to provide such information shall not be entitled to use the Prospectus. (n) The Company shall, if requested, promptly incorporate in a Prospectus supplement or post-effective amendment to a Shelf Registration Statement, such information as the Managing Underwriters, if any, and Majority Holders reasonably agree should be included therein and shall make all required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment. (o) The Company shall enter into such agreements (including underwriting agreements) and take all other appropriate actions in order to expedite or facilitate the registration or the disposition of the Securities or the shares of Common Stock issuable upon conversion thereof, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 5 (or such other provisions and procedures acceptable to the Majority Holders and the Managing Underwriters, if any), with respect to all parties to be indemnified pursuant to Section 5 by Holders of Securities or the Common Stock issuable upon conversion thereof to the Company, it being understood that all underwriting discounts and commissions, and all other underwriting fees, associated with such agreement in connection with such offering of the Securities and shares of Common Stock issuable upon conversion thereof shall, except as otherwise expressly agreed herein (including those expenses covered by Section 4), be for the account of the Holders or the underwriters. (p) The Company shall (i) make reasonably available for inspection by any Managing Underwriter participating in any disposition pursuant to such Shelf Registration Statement, and any attorney, accountant or other agent retained by the majority in principal amount or liquidation preference, as the case may be, of Holders of securities to be registered thereunder or 10 10 by any such Managing Underwriter, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries; (ii) cause the Company's officers, directors and employees to supply all relevant information reasonably requested by any such Managing Underwriter, attorney, accountant or agent in connection with such Shelf Registration Statement as is customary for similar due diligence examinations; provided, however, that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by any such Managing Underwriter, attorney, accountant or agent, unless disclosure thereof is made in connection with a court proceeding or required by law, or such information has become available (not in violation of this agreement) to the public generally or through a third party without an accompanying obligation of confidentiality; (iii) make such representations and warranties to the Holders of securities registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings; (iv) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any) addressed to each selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by Holders representing a majority by principal amount or number of shares, as the case may be, of the securities covered by such Shelf Registration Statement and by such Managing Underwriters; (v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, use its reasonable best efforts to retain any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Shelf Registration Statement), addressed to each selling Holder of securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and (vi) deliver such documents and certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, including those to evidence compliance with Section 3(i) and with any customary conditions contained in the 11 11 underwriting agreement or other agreement entered into by the Company. The foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of this Section 3(p) shall be performed at (A) the effectiveness of such Shelf Registration Statement and each post-effective amendment thereto and (B) each closing under any underwriting or similar agreement as and to the extent required thereunder. 4. Registration Expenses. The Company shall bear all expenses incurred in connection with the performance of the Company's obligations under Sections 2 and 3 hereof and shall reimburse the Holders for the reasonable and duly documented fees and disbursements of (i) counsel designated by the Majority Holders to act as counsel for the Holders in connection therewith so long as such counsel is the same counsel as designated by the Majority Holders under the Registration Statement, dated as of November 6, 1996, among the Company and the Purchasers named therein or (ii) in the absence of such selection of counsel by either of the Majority Holders or the Majority Holders under the Registration Statement dated as of November 6, 1996, referred to in clause (i), one firm designated by the underwriters to act as counsel for the Holders in connection therewith. It is understood, however, that except as provided in this Section, the Holders shall pay all their own costs and expenses, including stock transfer taxes due upon resale by them of any of the securities covered by a Shelf Registration Statement and any advertising expenses incurred in connection with any offers and sales they make. 5. Indemnification and Contribution. (a) In connection with any Shelf Registration Statement, the Company agrees to indemnify and hold harmless each Holder of securities covered thereby (including each Initial Purchaser), the directors, officers, employees and agents of each such Holder and each person who controls any such Holder within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such 12 12 indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) the Company will not be liable in any case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such Holder or underwriter or Managing Underwriter specifically for inclusion therein, (ii) the Company shall not be liable to any indemnified party under this indemnity agreement with respect to any Shelf Registration Statement or Prospectus to the extent that any such loss, claim, damage or liability of such indemnified party results solely from an untrue statement of a material fact contained in, or the omission of a material fact from, the Shelf Registration Statement or Prospectus which untrue statement or omission was corrected in an amended or supplemented Shelf Registration Statement or Prospectus, if the person alleging such loss, claim, damage or liability was not sent or given, at or prior to the written confirmation of such sale, a copy of the amended or supplemented Shelf Registration Statement or Prospectus if the Company had previously furnished copies thereof to such indemnified party and if such delivery of a prospectus is finally judicially determined to be required by the Act and was not so made and (iii) the Company will not be liable to any indemnified party under this indemnity agreement with respect to any Shelf Registration Statement or Prospectus to the extent that any such loss, claim, damage or liability of such indemnified party results (a) from the use of a Shelf Registration Statement during a period when a stop order has been issued in respect thereof or any proceedings for that purpose have been initiated or (b) from the use of the Prospectus during a period when the use of the Prospectus has been suspended in accordance with Section 3(c)(2)(iii) hereof, provided, in each case, that Holders received prior notice of such stop order, initiation of proceedings or suspension. This indemnity agreement will be in addition to any liability which the Company may otherwise have. The Company also agrees to indemnify or contribute to Losses, as provided in Section 5(d), of any underwriters of Securities or the shares of Common Stock issued upon conversion thereof registered under a Shelf Registration Statement, their officers and directors and each person who controls such underwriters on substantially the same basis as that of the indemnification of the Initial Purchasers and the selling Holders provided in this Section 5(a) and shall, if requested by any Holder, enter into an underwriting agreement reflecting such agreement, as provided in Section 3(o) hereof. 13 13 (b) Each Holder of securities covered by a Shelf Registration Statement (including each Initial Purchaser) severally agrees to indemnify and hold harmless (i) the Company, (ii) each of its directors, (iii) each of its officers who signs such Shelf Registration Statement and (iv) each person who controls the Company within the meaning of either the Act or the Exchange Act to the same extent as the foregoing indemnity from the Company to each such Holder, but only with reference to written information relating to such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any such Holder may otherwise have. (c) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel (and local counsel) if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to 14 14 the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, which consent shall not be unreasonably withheld, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 5 is unavailable to or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the issuance and sale of any Securities contemplated in any Purchase Agreement and the Shelf Registration Statement which resulted in such Losses; provided, however, that in no case shall any Initial Purchaser be responsible, in the aggregate, for any amount in excess of the purchase price applicable to such Securities, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the securities purchased by such underwriter under the Shelf Registration Statement which resulted in such Losses. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net value of the interest in Space Systems/Loral, Inc. it received in exchange for the 15 15 Securities (before deducting expenses). Benefits received by the Holders (including the Initial Purchasers) shall be deemed to be equal to the value such Holders realize by receiving Securities or the shares of Common Stock issuable upon conversion thereof registered under the Act. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Shelf Registration Statement which resulted in such Losses. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 5, each person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Shelf Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). (e) The provisions of this Section 5 will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company or any of the officers, directors or controlling persons referred to in Section 5 hereof, and will survive the sale by a Holder of securities covered by a Shelf Registration Statement. 6. Miscellaneous. (a) No Inconsistent Agreements. The Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. (b) Additional Initial Purchasers. This Agreement shall become effective upon its execution by the Company and Finmeccanica. The parties hereto 16 16 acknowledge and agree that any Initial Purchaser, in addition to Finmeccanica, who enters into a Purchase Agreement with the Company and executes a counterpart to this Agreement after the date hereof shall become a party to and a Holder under this Agreement and be bound by its terms and be able to enforce its rights as a Holder hereunder. Each such counterpart to this Agreement shall become effective with respect to such Initial Purchaser upon its execution by such Initial Purchaser, and it shall not require the signature or the consent of any other person who at the time is a party hereto. (c) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Holders of at least a majority of the then outstanding aggregate principal amount or liquidation preference, as the case may be, of Securities or the shares of Common Stock issued upon conversion thereof; provided that, with respect to any matter that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Company shall obtain the written consent of such Initial Purchaser or Initial Purchasers against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose securities are being sold pursuant to a Shelf Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Majority Holders, determined on the basis of securities being sold rather than registered under such Shelf Registration Statement. (d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telecopier, or air courier guaranteeing overnight delivery: (1) if to a Holder other than any Initial Purchaser, at the most current address given by such holder to the Company in accordance with the provisions of this Section 6(c), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture; 17 17 (2) if to any Initial Purchaser, initially at the addresses set forth in Schedule I attached hereto: (3) if to the Company, initially at its address set forth below: Loral Space & Communications Ltd. 600 Third Avenue New York, NY l00l6 All such notices and communications shall be deemed to have been duly given when received. Any Initial Purchaser or the Company by notice to the other may designate additional or different addresses for subsequent notices or communications. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders of Securities or the shares of Common Stock issuable upon conversion thereof. The Company hereby agrees to extend the benefits of this Agreement to any Holder of Securities and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto. (f) Counterparts. This agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. This agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed in said State. (i) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way 18 18 impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (j) Securities Held by the Company, etc. Whenever the consent or approval of Holders of a specified percentage of principal amount or liquidation preference, as the case may be, of Securities or the shares of Common Stock issued upon conversion thereof is required hereunder, Securities or the shares of Common Stock issued upon conversion thereof held by the Company or its Affiliates (other than subsequent Holders of Securities or the shares of Common Stock issued upon conversion thereof if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Securities or shares of Common Stock issued upon conversion thereof) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 19 19 Please confirm that the foregoing correctly sets forth the agreement between the Company and you. Very truly yours, LORAL SPACE & COMMUNICATIONS LTD., by /s/ Eric J. Zahler ------------------ Name: Eric J. Zahler Title: Vice President & Secretary Accepted in New York, New York March 31, 1997 FINMECCANICA S.p.A. by /s/ Christopher M. Wells ------------------------ Name: Christopher M. Wells Title: Attorney-in-Fact 20 20 Please confirm that the foregoing correctly sets forth the agreement between the Company and you. Very truly yours, LORAL SPACE & COMMUNICATIONS LTD., by /s/ Michael B. Targoff ---------------------- Name: Michael B. Targoff Title: President & COO Accepted in New York, New York June 23, 1997 AEROSPATIALE SNI by /s/ Michel Delaye ----------------- Name: Michel Delaye Title: Le Directeur, Aerospatiale Espace & Defense 21 21 Please confirm that the foregoing correctly sets forth the agreement between the Company and you. LORAL SPACE & COMMUNICATIONS LTD., by /s/ Michael B. Targoff ---------------------- Name: Michael B. Targoff Title: President & COO Accepted in New York, New York June 23, 1997 ALCATEL ESPACE by /s/ Jean Claude Husson ---------------------- Name: Jean Claude Husson Title: President and CEO 22 SCHEDULE I Finmeccanica S.p.A. Piazza Monte Grappa 4 00195 Rome ITALY Aerospatiale Societe Nationale Industrielle 100 BD Du Midi Cannes La Bocca Cedex FRANCE Alcatel Espace 11 Avenue Dubonnet 924047 Courbevoie Cedex FRANCE EX-10.5 6 TRANSACTION AGREEMENT 1 EXHIBIT 10.5 [EXECUTION COPY] TRANSACTION AGREEMENT between LORAL SPACE & COMMUNICATIONS LTD. and ALENIA INC. Dated as of March 20, 1997 2 TRANSACTION AGREEMENT TRANSACTION AGREEMENT dated as of March 20, 1997 (this "Agreement") between LORAL SPACE & COMMUNICATIONS LTD., a company organized under the laws of Bermuda ("Loral"), and ALENIA INC., a corporation organized under the laws of the State of Delaware ("Alenia"). W I T N E S S E T H : WHEREAS, pursuant to the Amended and Restated Agreement of Limited Partnership of Loral/QUALCOMM Satellite Services, L.P. ("LQSS") dated as of March 23, 1994 (the "Partnership Agreement"), Alenia (as successor by merger to Alenia Spazio USA, Inc.) is a limited partner in LQSS owning 1,800,000 partnership interests (the "Partnership Interests"); WHEREAS, Loral and Alenia have agreed that Alenia will transfer to Loral such number of the Partnership Interests as set forth in this Agreement in exchange for $80 million; NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1. THE TRANSACTION 1.1. Transaction. At the Closing described in Section 1.3 below, Alenia agrees to transfer to Loral such number of Partnership Interests (the "Transferred Partnership Interests") that when multiplied by the Transaction Price per Partnership Interest will equal $80 million, and, in exchange therefor, Loral agrees to transfer to Alenia $80 million in cash (the "Purchase Price"). 1.2. Certain Definitions. The following terms shall have the following meanings for purposes of this Agreement: "Adjustment Amount" shall mean the difference obtained by subtracting (i) the average of the GTL Stock Price on each of the three trading days after the GTL Rights Record Date from (ii) the average of the GTL Stock Price on each of the two trading days prior to the GTL Rights Record Date and on the GTL Rights Record Date. 3 "GTL" shall mean Globalstar Telecommunications Limited, a Bermuda company. "GTL Common Stock" shall mean the common stock of GTL, par value $1.00 per share. "GTL Rights Offering" shall mean the distribution to the public shareholders of the GTL Common Stock of subscription rights to purchase one share of GTL Common Stock at a subscription price of $26.50 per share for each 8.84042 shares held. "GTL Rights Record Date" shall mean March 24, 1997, which is the record date established by GTL for the GTL Rights Offering. "GTL Stock Price" shall mean, with respect to any trading day, the average of the high and low sales price for GTL Common Stock on such day on the NASDAQ National Market. "Transaction Price" per Partnership Interest shall mean 86% of the difference between (A) $62.50 and (B) the Adjustment Amount. 1.3. Closing. The closing ("Closing") of the transaction contemplated by Section 1.1 (the "Transaction") shall occur at the offices of Loral, 600 Third Avenue, New York, New York 10016 or such other place upon which the parties may agree on such date as Loral shall elect, but in no event later than April 15, 1997, or upon such other date after April 15, 1997 on which the parties may agree (the "Closing Date"). Loral shall notify Alenia in writing of the Closing Date at least three business days prior thereto. At the Closing, (a) Loral shall deliver to Alenia, the Purchase Price by wire transfer of immediately available funds to the account of Alenia designated by Alenia's written instructions delivered at least two full business days prior to the Closing Date, and (b) Alenia shall deliver to Loral any outstanding certificates representing the Transferred Partnership Interests, duly endorsed in blank for transfer or accompanied by appropriate transfer powers duly executed in blank and Schedule A to the Partnership Agreement shall be amended to reflect the Transaction. 2. REPRESENTATIONS AND WARRANTIES 2.1. Representations and Warranties of Loral. Loral represents and warrants to Alenia as follows: -2- 4 2.1.1. Organization. Loral is a company duly organized and validly existing under the laws of the Islands of Bermuda and has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted. 2.1.2. Authorization and Validity of Agreement. Loral has the corporate power to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the performance of Loral's obligations hereunder have been duly authorized by the Board of Directors of Loral, and no other corporate proceedings on the part of Loral are necessary to authorize such execution, delivery and performance. This Agreement has been duly executed by Loral and is the legal, valid and binding obligation of Loral. 2.1.3. No Conflict or Violation. The execution, delivery and performance by Loral of this Agreement do not and will not violate or conflict with any provision of the charter documents or bye-laws of Loral, and do not and will not violate any provision of any agreement or instrument to which Loral is a party or by which it is bound, or any order, judgment or decree of any court or other governmental or regulatory authority to which Loral is subject. Loral has given notice to the other partners of LQSS on behalf of Alenia as required by Section 10.03 of the Partnership Agreement in connection with the Transaction and the Transaction does not violate Section 10.03 of the Partnership Agreement. 2.1.4. Consent of LQSS General Partner. Loral/QUALCOMM Partnership, L.P., as the general partner of LQSS, has consented to the Transaction and to the admittance of Loral as a substituted limited partner in LQSS upon completion of the Transaction. 2.1.5. GTL Rights Record Date. Loral has caused GTL to file a Registration Statement on Form S-3 with the Securities and Exchange Commission with respect to the GTL Rights Offering. The staff of the Securities and Exchange Commission has informed Loral and GTL that it has no further comments with respect to such registration statement, and GTL has set March 24, 1997 as the GTL Rights Record Date. 2.2. Representations and Warranties of Alenia. Alenia represents and warrants to Loral as follows: -3- 5 2.2.1. Organization. Alenia is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted. 2.2.2. Authorization and Validity of Agreement. Alenia has the power to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the performance of Alenia's obligations hereunder have been duly authorized by the Board of Directors of Alenia, and no other corporate or other proceedings on the part of Alenia are necessary to authorize such execution, delivery and performance. This Agreement has been duly executed by Alenia and is the legal, valid and binding obligation of Alenia. 2.2.3. No Conflict or Violation. The execution, delivery and performance by Alenia of this Agreement do not and will not violate or conflict with any provision of the charter documents or by-laws of Alenia, and do not and will not violate any provision of any agreement or instrument to which Alenia is a party or by which it is bound, or any order, judgment or decree of any court or other governmental or regulatory authority to which Alenia is subject. 2.2.4. Title to Transferred Partnership Interests. Alenia holds good and valid title to the Transferred Partnership Interests, which interests are owned by Alenia free and clear of any lien or other right or claim, and when such interests are acquired by Loral in accordance with the terms of this Agreement, Loral will acquire good and valid title to such interests free of any lien or other right or claim. 3. CONDITIONS TO CLOSING 3.1. Conditions to the Closing. 3.1.1. Conditions to Obligations of Alenia. The obligations of Alenia to consummate the Transaction are subject to the satisfaction or waiver, at or prior to the Closing Date, of the following conditions: (a) the representations and warranties of Loral contained herein shall be true and correct in all -4- 6 material respects on and as of the Closing Date as if made on and as of such date; (b) Loral shall have performed and complied in all material respects with all agreements required by this Agreement to be performed or complied with by it on or prior to the Closing Date; and (c) Alenia shall have received a certificate signed by an executive officer of Loral to the effect that the conditions set forth in paragraphs (a) and (b) above have been satisfied. 3.1.2. Conditions to Obligations of Loral. The obligation of Loral to consummate the Transaction are subject to the satisfaction or waiver, at or prior to the Closing Date, of the following conditions: (a) the representations and warranties of Alenia contained herein shall be true and correct in all material respects on and as of the Closing Date as if made on and as of such date; (b) Alenia shall have performed and complied in all material respects with all agreements required by this Agreement to be performed or complied with by it on or prior to the Closing Date; and (c) Loral shall have received a certificate signed by and executive officer of Alenia to the effect that the conditions set forth in paragraphs (a) and (b) above have been satisfied. 3.1.3. Conditions to Obligations of Loral and Alenia. The obligations of Loral and Alenia to consummate the Transaction are subject to the satisfaction or waiver, at or prior to the Closing Date, of the following conditions: (a) all consents, waivers, authorizations and approvals of any governmental or regulatory authority required in connection with the execution, delivery and performance of this Agreement shall have been duly obtained and in full force and effect; and (b) the Transactions shall not be prohibited by any applicable law, court order or governmental regulation. -5- 7 4. MISCELLANEOUS 4.1. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 4.2. No Waivers; Amendments. 4.2.1. No failure or delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 4.2.2. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by each party hereto. 4.3. Survival of Provisions. The representations and warranties, covenants and agreements contained in this Agreement shall survive and remain in full force and effect, regardless of any investigation made by or on behalf of Alenia, or by or on behalf of Loral, and shall survive delivery of the Transferred Partnership Interests. 5.4. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties hereto and supersedes any and all prior agreements and understandings, written or oral, relating to the subject matter hereof. 5.5. Counterparts. This Agreement may be signed in counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument. 5.6. Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 5.7. Press Releases and Public Announcements. Prior to the Closing, press releases and public announcements or disclosures relating to the transactions -6- 8 contemplated hereby shall be made only if mutually agreed upon by the parties hereto, except to the extent required by law or by stock exchange regulation, provided that any such required disclosure will, to the extent practicable, be subject to consultation among the parties. 5.9. Expenses. Except as otherwise set forth in this Agreement, each party to this Agreement shall bear all the fees, costs and expenses that are incurred by it in connection with the transactions contemplated hereby, including, without limitation, attorneys' fees and fees of financial advisors and investment bankers engaged by such party. -7- 9 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth above. LORAL SPACE & COMMUNICATIONS LTD. By: /s/ Eric J. Zahler ------------------------------ Name: Eric J. Zahler Title: Vice President ALENIA INC. By: /s/ Alberto de Benedictis ------------------------------ Name: Alberto de Benedictis Title: Attorney-in-Fact -8- EX-10.6 7 PURCHASE AND SALE AGREEMENT 1 EXHIBIT 10.6 PURCHASE AND SALE AGREEMENT between LORAL SPACE & COMMUNICATIONS LTD. and ALCATEL SPACECOM ---------------------------------------- Dated as of June 19, 1997 ---------------------------------------- 2 PURCHASE AND SALE AGREEMENT PURCHASE AND SALE AGREEMENT, dated as of June 19, 1997 (the "Agreement"), between LORAL SPACE & COMMUNICATIONS LTD., a company organized under the laws of Bermuda ("Loral"), and ALCATEL SPACECOM, a societe par action simplifee organized under the laws of France ("Alcatel"). W I T N E S S E T H : WHEREAS, on the date hereof, Alcatel is a limited partner of, and the owner of 720,000 partnership interests (the "Partnership Interests") in, Loral/QUALCOMM Satellite Services, L.P., a Delaware limited partnership ("LQSS"), pursuant to that certain Amended and Restated Agreement of Limited Partnership of LQSS, dated as of March 23, 1994 (the "Partnership Agreement"); and WHEREAS, the parties hereto desire for Alcatel to exchange its Partnership Interests for cash and securities from Loral, as set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1. PURCHASE AND SALE 1.1. Purchase and Sale. 1.1.1. At the Closing described in Section 1.2. below, Alcatel shall sell, transfer and assign, and Loral shall purchase and acquire, the 720,000 Partnership Interests held by Alcatel (the "LQSS Interests") in exchange for (i) $17,487,360 in cash (the "Cash Consideration") and (ii) 1,255,684 shares of Loral Common Stock, par value $.01 per share (such shares the "LSC Shares"). 1.2. Closing. 1.2.1. Time and Place of Closing. The closing ("Closing") of the transactions contemplated by Section 1.1. (the "Purchase and Sale") shall take place at the law offices of Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York 10022 or such other place upon which the parties hereto may agree and shall occur (the "Closing Date") upon execution and delivery of this Agreement by the parties hereto. 3 1.2.2. Deliveries at Closing. At the Closing, (a) Loral is delivering to Alcatel (i) the Cash Consideration by wire transfer of immediately available funds to the account designated by Alcatel's written instructions delivered at least two (2) full business days prior to the Closing Date and (ii) share certificates for the LSC Shares, registered in the name of Alcatel; (b) Alcatel is delivering to Loral, and Loral is executing, the Assignment of Partnership Interests in the form attached hereto as Exhibit A; and (c) The parties hereto are acknowledging the delivery to Alcatel of the item required by Section 3.1.1. 1.2.3. Stock Transfer Taxes. Loral will bear all United States stock transfer taxes, direct or indirect, attributable to the share transfers in the Purchase and Sale. 2. REPRESENTATIONS AND WARRANTIES 2.1. Representations and Warranties of Loral. Loral represents and warrants to Alcatel as follows: 2.1.1. Organization; Capitalization. Loral is a company duly organized, validly existing and in good standing under the laws of the Islands of Bermuda and has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted. The authorized capital stock of Loral consists of (a) 750,000,000 shares of Common Stock, par value $.01 per share ("LSC Common Stock"), of which 191,162,455 shares are issued and outstanding and, without giving effect to the transactions contemplated hereby, 97,553,912 additional shares are reserved for issuance upon the exercise or conversion of outstanding options, warrants or convertible securities; (b) 150,000,000 shares of Series A Non-Voting Convertible Preferred Stock, par value $.01 per share, of which 45,896,977 shares are outstanding and none of which have been reserved for issuance; (c) 750,000 shares of Series B Preferred Stock, par value $.01 per share, no shares of which are outstanding, and 250,000 shares of which have been reserved for issuance upon the exercise of outstanding rights; and (d) 20,000,000 shares of 6% Series C Convertible Redeemable Preferred Shares, par value $.01 per share, of which 13,845,774 shares are outstanding and none of which are reserved for issuance. 2.1.2. Authorization and Validity of Agreement. Loral has the corporate power to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the performance of Loral's obligations hereunder have been, or will have been on the Closing Date, duly authorized by the Board of Directors of Loral, and no other corporate proceedings on the part of Loral are necessary to authorize such execution, delivery and performance. This Agreement has been duly executed by Loral and is the legal, valid and binding obligation of Loral. 2.1.3. No Conflict or Violation. The execution, delivery and performance by Loral of this Agreement do not and will not violate or conflict with any provision of the charter 2 4 documents or bye-laws of Loral, and do not and will not violate any provision of any agreement or instrument to which Loral is a party or by which it is bound, or any order, judgment or decree of any court or other governmental or regulatory authority to which Loral is subject. 2.1.4. Validity of Securities. The LSC Shares have been, or will have been as of the Closing Date, duly authorized for issuance and sale to Alcatel pursuant to this Agreement, and when duly executed and delivered against payment therefor as provided herein, will be validly issued, fully paid and non-assessable; the stock certificates evidencing the LSC Shares will be in due and proper form and comply with all applicable legal requirements; the issuance of the LSC Shares will not be subject to any call, preemptive or other similar rights. 2.1.5. Compliance with Partnership Agreement. (i) Loral has, or will have on the Closing Date, furnished the "General Partner" (as defined in the Partnership Agreement) with an agreement, in form reasonably satisfactory to the General Partner, to be bound by the Partnership Agreement and such other documents or instruments as may be required by the General Partner pursuant to Section 11.01(a) of the Partnership Agreement in order to effect Loral's admission as a "Limited Partner" (as defined in the Partnership Agreement); (ii) the General Partner has consented to the (A) transfer of the LQSS Interests contemplated hereunder, as required by Section 10.03(a) of the Partnership Agreement, and (B) admission of Loral as a substituted Limited Partner in LQSS upon consummation of the Purchase and Sale in satisfaction of Section 11.01(b) of the Partnership Agreement; and (iii) all other requirements for the transfer of the LQSS Interests pursuant to the Partnership Agreement contemplated hereunder have been met or otherwise waived. 2.1.6. Registration and Resale of LSC Shares. The LSC Shares have been duly registered under the U.S. Securities Act of 1933, as amended ("Securities Act") (pursuant to Securities Act Registration Number 333-26517, on Form S-3, the "Registration Statement"), and applicable state securities laws (collectively the "Securities Laws") and admitted for trading on the New York Stock Exchange. Other than restrictions imposed by the Securities Laws, the LSC Shares are not subject to any legal or contractual restrictions on resale. 2.2. Representations and Warranties of Alcatel. Alcatel represents and warrants to Loral as follows: 2.2.1. Organization. Alcatel is a societe par action simplifee duly organized, validly existing and in good standing under the laws of the Republic of France, and has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted. 2.2.2. Authorization and Validity of Agreement. Alcatel has the corporate power to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the performance of Alcatel's obligations hereunder have been duly authorized by the appropriate governing body of Alcatel, and no other corporate proceedings on the part of Alcatel are necessary to authorize such execution, delivery and performance. This Agreement has been duly executed by Alcatel and is the legal, valid and binding obligation of Alcatel. 3 5 2.2.3. No Conflict or Violation. The execution, delivery and performance by Alcatel of this Agreement do not and will not violate or conflict with any provision of the charter documents or by-laws (or corresponding instruments under the laws of France) of Alcatel, and do not and will not violate any provision of any agreement or instrument to which Alcatel is a party or by which it is bound, or any order, judgment or decree of any court or other governmental or regulatory authority to which Alcatel is subject. 2.2.4. Title to LQSS Interests. Alcatel is the lawful owner of the LQSS Interests. Alcatel has good, valid and marketable title, free and clear of all liens, pledges, security interests, and encumbrances, to the LQSS Interests, with full right and lawful authority to sell and transfer such interests to Loral pursuant to this Agreement. Upon payment for the LQSS Interests to be purchased by Loral, Loral will acquire good, valid, and marketable title thereto, free and clear of all liens, pledges, security interests, and encumbrances except as set forth in the Partnership Agreement. 2.2.5. No Brokers or Agents. Alcatel has not retained the services of any broker or agent in connection with the Purchase and Sale. 3. ACKNOWLEDGMENT 3.1. Acknowledgment. The parties hereto acknowledge that Alcatel has received an opinion, dated the Closing Date, from Appleby, Spurling & Kempe as to due formation of Loral and the legality of the LSC Shares issued to Alcatel hereunder. 4. BLOCK TRADE UNDERTAKING 4.1. Definitions. The following terms shall have the meanings ascribed to them below: 4.1.1. "Excess Amount" means the number of LSC Shares requested by a Holder or Holders to be sold pursuant to Section 4.3. which the managing Underwriter or Underwriters determines exceeds the largest number of LSC Shares which can successfully sold in an orderly manner in such offering within the price range acceptable to Loral. 4.1.2. "Holders" means each of Alcatel for so long as it owns any LSC Shares, and such of its successors and assigns who acquire LSC Shares, directly or indirectly, from Alcatel, in each case for so long as such successors or assigns own any LSC Shares. 4.1.3. "Majority Holders" means the Holders of a majority of the LSC Shares. 4.1.4. "Person" means an individual or a corporation, partnership, limited liability company, trust, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. 4 6 4.1.5. "Underwriter" means a securities dealer who purchases any Loral securities as principal in an underwritten offering and not as part of such dealer's market-making activities. 4.2. Block Trade Undertaking 4.2.1. Broker-dealers. Upon request from the Majority Holders, Loral shall use its reasonable best efforts to assist the Majority Holders in identifying registered broker-dealers (each, a "Broker") ready, willing and able to effectuate a sale of all or a portion of the LSC Shares on terms acceptable to the Majority Holders in a manner consistent with customary practice (other than pursuant to an underwritten public offering) as contemplated under the heading "Plan of Distribution" in the Registration Statement, including, but not limited to, a block sale of all or a portion of the LSC Shares. 4.2.2. Preferred Sales Method. The Majority Holders and Loral acknowledge and agree that their preferred manner of execution of the sale of LSC Shares pursuant to Section 4.2. would be by means of a trade not requiring any additional agreements, indemnification, or securities filings on the part of Loral, so long as the terms of the transaction are otherwise satisfactory to the Majority Holders. In the event, however, that no Broker recommended by Loral is prepared to effectuate the sale on terms satisfactory to the Majority Holders without (i) an agreement providing for indemnification, representations and warranties or covenants (an "Indemnity Agreement") or (ii) requiring Loral to incorporate in a prospectus supplement or post-effective amendment to the Registration Statement information relating to the transaction with the Broker, then Loral shall enter into such Indemnity Agreement and incorporate in a prospectus supplement or post-effective amendment to the Registration Statement such information as is reasonably determined to be included therein by such Broker and the Majority Holders, and make all required filings of the same. 4.3. Piggy-Back Offering. If at any time Loral, for its own account or for the account of any of its securityholders, proposes to offer Loral's Common Stock, par value $.01 per share, in the form of a primary or secondary underwritten offering (other than with respect to a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the Commission) or a registration statement filed in connection with an exchange offer or offering of securities solely to Loral's existing securityholders), then Loral shall give written notice of such proposed underwritten offering to Holders as soon as practicable (but in no event later than the anticipated filing date of such offering), and such notice shall offer such Holders the opportunity to include in such underwritten offering such number of LSC Shares as each such Holder may request (which request shall specify the number of LSC Shares intended to be disposed of by such Holder) (a "Piggy-Back Offering"). Loral shall use its reasonable best efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the LSC Shares requested to be included in a Piggy-Back Offering to be included on the same terms and conditions as any similar securities of Loral included therein to permit the sale or other disposition of such LSC Shares in accordance with the intended method of distribution thereof. Notwithstanding the foregoing, Holders shall not be entitled to a Piggy-Back Offering in connection with any underwritten offering granted by Loral to a third party pursuant to a 5 7 contractual obligation if the agreement between such third party and Loral providing for such underwritten offering prohibits Loral from granting to other Persons the right to "piggy-back" on to such underwritten offering; provided that in such event, Loral shall provide Holders notice of such prohibition prior to the anticipated filing date of such registration so as to permit Holders to seek permission from such third party to include LSC Shares in such underwritten offering. 4.4. Reduction of Offering. Notwithstanding anything contained herein, if the managing Underwriter or Underwriters of an offering described in Section 4.3. deliver a written opinion to the Holders of the LSC Shares requesting inclusion in such offering that (i) the size of the offering that the Holders, Loral and/or such other Persons intend to make or (ii) the kind of securities that the Holders, Loral and/or any other Persons intend to include in such offering is such that the success of the offering would be materially and adversely affected by inclusion of the LSC Shares requested to be included, then (A) if the size of the offering is the basis of such Underwriter's or Underwriters' opinion, Loral shall not include an amount of LSC Shares requested to be included in such offering by all Holders equal to the Excess Amount (such reduction to be allocated pro rata among the Holders requesting inclusion of LSC Shares in the Piggy-Back Offering); provided that if securities are being offered for the account of other Persons as well as Loral, then with respect to the LSC Shares intended to be offered by Holders, the proportion by which the amount of such class of securities intended to be offered by Holders is reduced shall not exceed the proportion by which the amount of such class of securities intended to be offered by such other Persons is reduced (it being understood that such reduction may be all of such class of securities); and (B) if the combination of securities to be offered is the basis of such Underwriter's or Underwriters' opinion, (x) the LSC Shares to be included in such offering shall be reduced as described in clause (A) above (subject to the proviso in clause (A)) or, (y) if the actions described in clause (B)(x) would, in the judgment of the managing Underwriter or Underwriters, be insufficient to substantially eliminate the adverse effect that inclusion of the LSC Shares requested to be included would have on such offering, such LSC Shares will be excluded from such offering. If, as a result of the proration provisions of this Section 4.4., any Holder shall not be entitled to include all LSC Shares in a Piggy-Back Offering that such Holder has requested to be included, such Holder may elect to withdraw his request to include LSC Shares in such offering (a "Withdrawal Election"); provided, however, that a Withdrawal Election shall be irrevocable and, after making a Withdrawal Election, a Holder shall no longer have any right to include LSC Shares in the offering as to which such Withdrawal Election was made. 4.5. Registration Statement. Loral covenants that it shall use its reasonable best efforts to maintain the Registration Statement continuously effective under the Securities Act until the earlier of the (a) date that the LSC Shares shall no longer constitute restricted securities pursuant to Rule 144(k) of the Securities Act or (b) the date that all the LSC Shares shall have been sold pursuant to such Registration Statement. 6 8 5. MISCELLANEOUS 5.1. Additional Actions and Documents. Each of the parties hereto hereby agrees to take or cause to be taken such further actions, to execute, deliver, and file or cause to be executed, delivered and filed such further documents and instruments, and to obtain such consents, as may be necessary or as may be reasonably requested in order to fully effectuate the purposes, terms and conditions of this Agreement, whether before or after the Closing Date. 5.2. LSC Shares. The LSC Shares to be issued pursuant to this Agreement shall be separate from any LSC Common Stock acquired by Alcatel Espace in connection with the sale of its interest in Space Systems/Loral, Inc., a Delaware corporation, and shall not be included in any ownership calculations of LSC Common Stock pursuant to any agreement that Alcatel Espace may enter in connection with such sale. 5.3. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the doctrine of conflicts of laws. 5.4. No Waivers; Amendments. 5.4.1. No failure or delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 5.4.2. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by each party hereto. 5.5. Survival of Provisions. The representations and warranties, covenants and agreements contained in this Agreement shall survive and remain in full force and effect, regardless of any investigation made by or on behalf of Alcatel, or by or on behalf of Loral, and shall survive delivery of the Cash Consideration, LSC Shares, and the LQSS Interests. 5.6. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties hereto and supersedes any and all prior agreements and understandings, written or oral, relating to the subject matter hereof. 5.7. Counterparts. This Agreement may be signed in counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument. 5.8. Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 7 9 5.9. Press Releases and Public Announcements. Any press releases and public announcements or disclosures relating to the transactions contemplated hereby shall be made only if mutually agreed upon by the parties hereto, except to the extent a party has been advised in writing by counsel (with a copy provided to the other party) that failure to disclose would violate applicable law or stock exchange regulation, provided that any such required disclosure will, to the extent practicable, be subject to prior consultation among the parties. 5.10. Expenses. Except as otherwise set forth in this Agreement, each party to this Agreement shall bear all the fees, costs and expenses that are incurred by it in connection with the transactions contemplated hereby, including, without limitation, attorneys' fees and fees of financial advisors and investment bankers engaged by such party. 5.11. Notices. All notices, demands, requests, or other communications which may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by hand delivery (including delivery by courier), telegram, telex, or facsimile transmission, addressed as follows: To Alcatel: Alcatel Spacecom 5, rue Noel Pons 92737 Nanterre Cedex France Attn.: Lionel Fleury President Arlette Lefeuvre, Esq. Fax: 011-331-46-52-64-60 with a copy (which shall not constitute notice) to: Hogan & Hartson L.L.P. Columbia Square 555 13th Street, N.W. Washington, D.C. 20004-1109 Attn.: Mark E. Mazo, Esq. Fax: 202/637-5910 To Loral: Loral Space & Communications Ltd. 600 Third Avenue New York, New York 10016 Attn.: Michael B. Targoff President and Chief Operating Officer Fax: 212/682-9805 with a copy (which shall not constitute notice) to: 8 10 Loral Space & Communications Ltd. 600 Third Avenue New York, New York 10016 Attn.: Eric Zahler, Esq. Avi Katz, Esq. Fax: 212/338-5350 and Willkie Farr & Gallagher One Citicorp Center 153 East 53rd Street New York, New York 10022 Attn.: Bruce Kraus, Esq. Fax: 212/821-8111 9 11 IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement as of the date first set forth above. LORAL SPACE & COMMUNICATIONS LTD. By: /s/ Michael B. Targoff ---------------------- Name: Michael B. Targoff Title: President and Chief Operating Officer ALCATEL SPACECOM By: /s/ Lionel Fleury ----------------- Name: Lionel Fleury Title: President 10 -----END PRIVACY-ENHANCED MESSAGE-----