Shareholders Agreement

EXECUTION COPY


SHAREHOLDERS AGREEMENT


dated as of April 23, 1996


by and among


LORAL CORPORATION,


and


LORAL SPACE & COMMUNICATIONS LTD.


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SHAREHOLDERS AGREEMENT
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SHAREHOLDERS AGREEMENT, dated as of April 23, 1996 (the "Agreement"), by and among Loral Corporation, a New York corporation ("Loral"), and Loral Space & Communications Ltd., a Bermuda company (the "Company"). Loral and those of its Affiliates who are transferees with respect to any of the Equity Securities (as defined below), are sometimes collectively referred to herein as the "Shareholders".


RECITALS:
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WHEREAS, Lockheed Martin Corporation, a Maryland corporation ("LMC"), Loral and certain subsidiaries of Loral entered into a Restructuring, Financing and Distribution Agreement, dated as of January 7, 1996 (the "Restructuring Agreement"; all capitalized terms used in this Agreement but not otherwise defined herein, shall have the respective meanings assigned to such terms in the Restructuring Agreement), pursuant to which, after giving effect to the Restructuring and the Distribution, Loral acquired 45,896,978 shares of Series A Convertible Preferred Stock, par value $0.01 per share, of the Company (the "Preferred Stock"); and


WHEREAS, the Company and Loral desire to establish in this Agreement certain conditions with respect to the relationship between the Shareholders and the Company;


NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and in the Restructuring Agreement, the parties hereto agree as follows:


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I.


STANDSTILL AND VOTING PROVISIONS


1.1. Restrictions on Certain Actions by the Shareholders. (a) During the Term (as defined in Article V below), each Stockholder will not, and will cause each of its Affiliates (such term, as used in this Agreement, as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) not to, singly or as part of a partnership, limited partnership, syndicate or other group (as those terms are used in Section 13(d)(3) of the Exchange Act), directly or indirectly:


(i) acquire, offer to acquire, or agree to acquire,
by purchase, gift or otherwise, any Equity Securities (as defined below
in Section 1.1(c)), except pursuant to a stock split, stock dividend,
rights offering, recapitalization, reclassification, merger,
consolidation, corporate reorganization or similar transaction;
provided that at any time in which the Shareholders hold, in the
aggregate, less than twenty percent (20%) of the Total Voting Power,
then the Shareholders may acquire Equity Securities so that the
Shareholders hold, in the aggregate, up to twenty percent (20%) of the
Total Voting Power;


(ii) make, or in any way actively participate in, any
"solicitation" of "proxies" to vote (as such terms are defined in Rule
14a-1 under the Exchange Act), solicit any consent or communicate with
or seek to advise or influence any third party with respect to the
voting of any Equity Securities or become a "participant" in any
"election contest" (as such terms are defined or used in Rule 14a-11
under the Exchange Act), in each case with respect to the Company,
except as expressly provided in Section 1.7;


(iii) form, join or encourage the formation of, any
"person" or "group" within the meaning of Section 13(d) of the Exchange
Act with respect to any Equity Securities; provided that this Section
1.1(a)(iii) shall not prohibit any such arrangement solely among the
Shareholders and any of their respective Affiliates;


(iv) deposit any Equity Securities into a voting
trust or subject any such Equity Securities to any arrangement or
agreement with respect to the voting thereof; provided that this
Section 1.1(a)(iv) shall not prohibit any such arrangement solely among
the Shareholders and any of their respective Affiliates;


(v) initiate, propose or otherwise solicit
Shareholders for the approval of one or more stockholder proposals with
respect to the Company as described in Rule 14a-8 under the Exchange
Act, or induce or attempt to induce


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any other third party to initiate any stockholder proposal, except as
expressly provided in Section 1.7;


(vi) except as otherwise contemplated or permitted by
this Agreement (including, without limitation, pursuant to Section 1.2
or 1.7 hereof), seek to place a representative on the Board of
Directors of the Company or seek the removal of any member of the Board
of Directors of the Company, except with the approval of the Board of
Directors or management of the Company;


(vii) except with the approval of the Board of
Directors or management of the Company, call or seek to have called any
meeting of the Shareholders of the Company;


(viii) except through its representatives on the
Board of Directors (or any committee thereof) of the Company (if any)
and except as otherwise contemplated by this Agreement or the
Restructuring Agreement (including the agreements and other documents
referred to therein, including, without limitation, the Tax Sharing
Agreement), otherwise act to seek to control the management or policies
of the Company, except with the approval of the Board of Directors or
management of the Company;


(ix) sell or otherwise transfer in any manner any
Equity Securities to any "person" (within the meaning of Section
13(d)(3) of the Exchange Act) who, immediately following such sale or
transfer, would, to the best of the Stockholder's knowledge, own more
than four percent (4%) of any class of Equity Securities or who,
without the approval of the Board of Directors of the Company, (A) has
publicly proposed a business combination or similar transaction with,
or a change of control of, the Company or who has publicly proposed a
tender offer for Equity Securities or (B) who has discussed with Loral
or any of its respective Affiliates the possibility of proposing a
business combination or similar transaction with, or a change in
control of, the Company;


(x) sell or otherwise transfer in any manner to any
person (as defined in clause (ix) above) in any single transaction or
series of related transactions more than 2% of the outstanding Equity
Securities;


(xi) solicit, seek to effect, negotiate with or
provide any information to any other party with respect to, or make any
statement or proposal, whether written or oral, to the Board of
Directors of the Company or any director or officer of the Company or
otherwise make any public announcement or proposal whatsoever with
respect to, any form of business combination transaction involving the
Company, including, without limitation, a merger, exchange offer or
liquidation of the Company's assets, or any


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corporate reorganization or similar transaction with respect to the
Company, except in each case with the approval of the Board of
Directors or management of the Company; or


(xii) instigate or encourage any third party to do
any of the foregoing.


Notwithstanding clauses (ix) and (x) above, the Shareholders may effect any transaction contemplated by Article III hereof.


(b) Notwithstanding the provisions of this Section 1.1, nothing herein shall apply with respect to any Equity Securities acquired from any person other than a Stockholder (x) held by any pension, retirement or other benefit plan managed by any Stockholder or any of its subsidiaries or other Affiliates or (y) held in any account managed for the benefit of another person, by any subsidiary or other Affiliate of any of the Shareholders which is engaged in the financial services business. In addition, notwithstanding the provisions of this Section 1.1, nothing herein shall prohibit or restrict any transfer of Equity Securities to or among any of the subsidiaries or other Affiliates of any of the Shareholders (provided that such subsidiary or Affiliate agrees to be bound to the provisions of this Agreement, upon which such subsidiary or Affiliate shall be entitled to all rights and benefits, and shall be subject to all obligations, of a Stockholder under this Agreement).


(c) For the purposes of this Agreement, (i) the term "Equity Securities" shall mean the Preferred Stock and any securities entitled to vote generally in the election of directors of the Company, or any direct or indirect rights or options to acquire any such securities or any securities convertible or exercisable into or exchangeable for such securities (provided that, in the event that the Guaranty Warrants (as defined below) become warrants to acquire Equity Securities, such Guaranty Warrants and any securities issued pursuant to the exercise of such Guaranty Warrants, shall not (so long, in each case, as they are held by the Stockholder) constitute Equity Securities for purposes of determining the appropriate number of shares of Common Equity Securities which Loral is entitled to acquire hereunder, including in connection with the determination of the Target Percentage pursuant to Section 1.4(a) hereof), (ii) the term "Voting Power" shall mean the voting power in the general election of directors of the Company, (iii) the term "Total Voting Power" shall mean the total combined Voting Power of all the Equity Securities then outstanding, including, without limitation, the Preferred Stock, and, insofar as the Preferred Stock is concerned, it is deemed to have Voting Power equal to that of the Common Stock into which it is convertible, (iv) the term "Change of Control" shall mean the occurrence of any of the following events: (A) any "person" or


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"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the beneficial owner of Equity Securities which represent at least forty percent (40%) of the Total Voting Power, or (B) during any one-year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office, (v) the term "beneficial owner", and terms having similar import, shall mean any direct or indirect "beneficial owner", as such term is defined in Rules 13d-3 and 13d-5 under the Exchange Act, and (vi) the term "Guaranty Warrants" shall mean those warrants which accrue to the benefit of the Company in connection with the Globalstar Bank Guarantee, as described in the Globalstar Warrant Memorandum.


1.2. HSR Clearance.


(a) At any time after the date hereof (but subject to the provisions of Section 1.2(b) below), following a written request by Loral to the Company (such request, the "HSR Notice"), the Company and the Shareholders will (i) take promptly all actions necessary to make the filings required of the Shareholders, the Company or any of their respective Affiliates under the HSR Act (as defined in the Merger Agreement) with respect to the right to convert Preferred Stock and continue to own the securities so received, the ownership and voting of Equity Securities by the Shareholders, any of the transactions contemplated by this Agreement or any other similar matters (all such exercise, ownership, voting, transaction and other similar matters, the "Filing Matters"), (ii) comply at the earliest practicable date with any request for additional information or documentary material received by the Company or the Shareholders or any of their Affiliates from any of the Federal Trade Commission, the Antitrust Division of the Department of Justice, state attorneys general, the Commission, or other governmental or regulatory authorities (all such authorities, the "Antitrust Authorities"), and (iii) cooperate with each other in connection with any of the filings referred to in clause (i) above and in connection with resolving any investigation or other inquiry commenced by any of the Antitrust Authorities. To the extent reasonably requested by Loral, the Company shall use all reasonable efforts to resolve such objections, if any, as may be asserted with respect to the Filing Matters. If any administrative, judicial or legislative action or proceeding is instituted (or threatened to be instituted) challenging any aspect of the Filing Matters as violative of any Antitrust Law, each of the Shareholders and the Company shall cooperate with


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each other to contest and resist any such action or proceeding, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) that is in effect and that restricts, prevents or prohibits the exercise by the Shareholders of the right to convert Preferred Stock and continue to own the securities so received, or the exercise by Loral of its rights with respect to the ownership and voting of Equity Securities or any of the transactions contemplated by this Agreement (any such decree, judgment, injunction or other order is hereafter referred to as an "Order"), including, without limitation, by pursuing all reasonable avenues of administrative and judicial appeal, provided that nothing contained in this Section 1.2(a) shall be construed to require any party hereto to hold separate or divest any of their respective assets or businesses or agree to any substantive restriction thereon or on the conduct thereof. Each of the Company and Loral shall promptly inform the other party of any material communication received by such party from any Antitrust Authority regarding any of the Filing Matters or any of the other transactions contemplated hereby. For the purposes of this Agreement, the term "HSR Clearance Date" shall mean the first date on which (x) any applicable waiting period under the HSR Act with respect to the Filing Matters shall have expired or been terminated, (y) there shall not be pending any Action commenced by any Antitrust Authority relating to any of the Filing Matters or any of the other transactions contemplated hereby, and (z) there shall not be in effect any Order.


(b) Notwithstanding the provisions of Section 1.2(a) above, in the event that Loral delivers the HSR Notice to the Company, the Company shall be entitled to postpone for a reasonable period of time (but in no event later than 45 days), any filing referred to in Section 1.2(a)(i) above if the Company determines in its reasonable judgment and in good faith that such filing would delay the obtaining of any approval from an Antitrust Authority with respect to any announced or imminent material acquisition or disposition which would require a filing by the Company under the HSR Act. In the event of such postponement, Loral shall have the right to withdraw its HSR Notice and may deliver any such HSR Notice at any time thereafter.


1.3. Voting.


(a) General Voting Provisions. Prior to the HSR Clearance Date, no Stockholder shall have the right to convert Preferred Stock into common stock or the right to vote any Equity Securities with respect to the election of directors of the Company. Following the HSR Clearance Date, each Stockholder shall have the right to vote its Equity Securities to the extent permitted by the terms thereof on any matters submitted to a vote of the Shareholders of the Company, provided that following the HSR Clearance Date any Stockholder shall have the right to vote


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any Equity Securities to the extent permitted by the terms thereof with respect to the election of directors of the Company without restriction, provided that, except as expressly provided in Section 1.7, in the event of an "election contest" (as such term is used in Rule 14a-11 under the Exchange Act) each Stockholder shall have the right to vote in the election contest only (i) as recommended by the Board of Directors or management of the Company or (ii) in the same proportions as the holders of Equity Securities (other than Shareholders) vote their Securities. On each matter with respect to which a Stockholder is entitled to vote pursuant to this Section 1.3, each such Stockholder shall be present, in person or represented by proxy, at all such stockholder meetings of the Company so that all Equity Securities beneficially owned by it shall be counted for the purpose of determining the presence of a quorum at such meetings. For purposes of this Section 1.3, all references to the term "vote" shall include the execution and delivery of any written consent with respect to the taking of any shareholder action in lieu of a meeting of shareholders.


(b) Company Call. If, within one year following the date hereof, the Shareholders vote against any Call Event Triggering Transaction (as defined below), the Company shall have the right, for 10 days following the date on which such vote is held, to purchase, and the Shareholders shall be required to sell to the Company, all, but not less than all, of the Equity Securities held by the Shareholders at a per share cash price equal to the Call Event Trigger Price (as defined below). The Company may exercise such right by delivering to each Stockholder, within such 10-day period, a written notice stating that the Company has irrevocably agreed to purchase in cash all (but not less than all) of the Equity Securities held by the Shareholders at the Call Event Trigger Price upon the terms and conditions set forth in this Section 1.3(b). The closing with respect to the purchase of Equity Securities by the Company pursuant to this Section 1.3(b) shall be on a mutually determined closing date which shall not be more than 15 days after the date on which the Company's written notice referred to above is delivered to the Shareholders. The closing shall be held at 10:00 A.M., local time, at the principal office of the Company, or at such other time or place as the parties mutually agree. On such closing date, each Stockholder shall deliver (i) certificates representing the shares of Equity Securities being sold, free and clear of any lien, claim or encumbrance, and (ii) such instruments of transfer and evidence of ownership and authority as the Company may reasonably request. The purchase price shall be paid by the Company to each Stockholder by wire transfer of immediately available funds no later than 2:00 P.M. on the closing date to the account(s) designated by the Shareholders prior to such closing date.


(c) Certain Definitions. For purposes of Section 1.3,


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(i) the term "Call Event Triggering Transaction"
shall mean a transaction between the Company, on the one hand, and any
Spinco Company (or any other Subsidiary of either the Company or a
Spinco Company), on the other hand, involving (x) any merger,
consolidation, corporate reorganization or similar transaction
involving the Company; or (y) any sale, lease, exchange, transfer or
other disposition, directly or indirectly, in a single transaction or
series of related transactions, of all or substantially all of the
assets of the Company or any of its Affiliates; provided that the term
"Call Event Triggering Transaction" shall not include any transaction
involving any party which is not a Spinco Company (or any other
Subsidiary of either the Company or a Spinco Company); and


(ii) the term "Call Event Trigger Price" shall mean
the sum of (x) $344,000,000.00, plus (y) all amounts expended by the
Shareholders following the date hereof in connection with the
acquisition of Equity Securities other than acquisitions from another
Stockholder following the date hereof, minus (z) any net sales proceeds
received by the Shareholders following the date hereof in connection
with the sale of Equity Securities (other than sales to another
Stockholder) following the date hereof.


1.4. Loral Option.


(a) General Provisions Relating to Loral Option. If, within five years following the date hereof, any Option Event Triggering Transaction (as defined below) occurs, Loral shall have the right, within 90 days after the consummation of the Option Event Triggering Transaction, to purchase, and the Company (for purposes of this Section 1.4, all references to the "Company" shall be deemed to include the Surviving Corporation (as defined below), shall be required to sell to Loral, a number of shares of Preferred Stock which would cause Loral to own Equity Securities with Voting Power equal to the Target Percentage (as defined below) of the Total Voting Power immediately after giving effect to the consummation of the Option Event Triggering Transaction, at a per share cash price equal to the Option Event Trigger Price (as defined below). Loral may exercise such right by delivering to the Company, within such 90-day period, a written notice stating that Loral (or any Subsidiary of Loral designated by Loral; for purposes of this Section 1.4, all references to "Loral" shall be deemed to include such designated Subsidiary) has irrevocably agreed to purchase in cash the number of shares of Preferred Stock specified in the preceding sentence, at the Option Event Trigger Price, upon the terms and conditions set forth in this Section 1.4. The closing with respect to the purchase of Preferred Stock by the Company pursuant to this Section 1.4 shall be on a mutually determined closing date which shall not be more than 15 days after the date on which Loral's written notice referred to above is delivered to


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the Company. The closing shall be held at 10:00 A.M., local time, at the principal office of the Company, or at such other time or place as the parties mutually agree. On such closing date, the Company shall issue to Loral certificates representing the shares of Preferred Stock being sold, which shall be validly issued, fully paid and non-assessable and free and clear of any lien, claim or encumbrance. The purchase price shall be paid by Loral to the Company by wire transfer of immediately available funds no later than 2:00 P.M. on the closing date to the account designated in writing by the Company prior to such closing date. For purposes of this Section 1.4,


(i) the term "Option Event Triggering Transaction"
shall mean a transaction involving as parties, among others, the
Company or any of its Affiliates (other than GTL and Globalstar), on
the one hand, and either GTL or Globalstar or any of their respective
Subsidiaries, on the other hand, involving either (x) a Call Event
Triggering Transaction (including, without limitation, a similar
transaction involving the merger, consolidation, reorganization, sale,
lease, exchange, transfer or other disposition of all or substantially
all of the assets, of Globalstar, GTL or their respective Subsidiaries)
or the liquidation or (y) dissolution of the Company;


(ii) the term "Option Event Trigger Price" shall mean
with respect to an Option Event Trigger Transaction occurring (x) on or
prior to the first anniversary hereof, a $6.00 per share cash purchase
price, subject to adjustment pursuant to the provisions of Section
1.4(b) hereof or (y) after the first anniversary hereof but on or prior
to the fifth anniversary hereof, a per share price equal to 80% of the
per share price of the Company implicit in the Option Event Triggering
Transaction;


(iii) the term "Surviving Corporation" shall mean any
successor to the rights and obligations of the Company as a result of
or in connection with any Option Event Triggering Transaction; and


(iv) the term "Target Percentage" shall mean a
percentage amount equal to the percentage of the Total Voting Power
represented by the Equity Securities held by the Shareholders
immediately prior to the closing of the Option Event Triggering
Transaction; provided, however, that if there has occurred within the
five days preceding such closing an event that diluted the Voting Power
of the Equity Securities held by the Shareholders, the Target
Percentage shall be determined as of the date five days prior to the
closing of such Option Event Triggering Transaction.


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(b) Adjustment of Loral Option Event Trigger Price. The Option Event Trigger Price shall be equitably adjusted from time to time after the date hereof to take into account of any of the following events: (i) if the Company shall pay a dividend or make any other distribution with respect to any Equity Securities which is payable in the form of Equity Securities or in the form of any other Asset (other than normal, periodic cash dividends of the Company), (ii) if the Company shall subdivide its outstanding common stock, (iii) if the Company shall combine its outstanding common stock into a smaller number of shares, (iv) if the Company shall issue any shares of its capital stock in a reclassification of the Common Stock (including any such reclassification in connection with a merger, consolidation or other business combination involving the Company), or (v) in any other similar transaction affecting the Company or the number or value of the outstanding Equity Securities. The parties acknowledge and agree that each such equitable adjustment shall preserve for Loral the economic benefits of the Loral option set forth in Section 1.4(a) above.


1.5. Globalstar Warrant Put Option. In the event of any of the following transactions (each such transaction, a "Warrant Trigger Event"):


(i) any merger, consolidation, corporate reorganization or
similar transaction involving Globalstar or GTL;


(ii) any sale, lease, exchange, transfer or other disposition,
directly or indirectly, of all or substantially all of the assets of
Globalstar or GTL; or


( ...