EXHIBIT 10.1 EMPLOYMENT AGREEMENT

 

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                                                                    Exhibit 10.1

 

                              EMPLOYMENT AGREEMENT

 

     AGREEMENT, dated as of the 21st day of November 2005, by and between Loral

Space & Communications Inc., a Delaware corporation (the "Company"), Bernard L.

Schwartz, a resident of New York, New York (the "Executive"), and those

subsidiaries of the Company signatory hereto solely for purposes of Section

11(m) hereof.

 

     WHEREAS, the Company desires to engage the services of the Executive and

the Executive desires to be employed by the Company on the terms and conditions

hereinafter set forth; and

 

     WHEREAS, the Company desires to be assured that all proprietary and

confidential information of the Company will be preserved for the exclusive

benefit of the Company;

 

     NOW, THEREFORE, in consideration of such employment and the mutual

covenants herein contained, and for other good and valuable consideration, the

receipt and sufficiency of which are hereby acknowledged, the Company and the

Executive agree as follows:

 

     Section 1. Employment and Position. The Company hereby employs the

Executive as its Chief Executive Officer and Chairman of the Board of Directors

of the Company, and the Executive hereby accepts such employment under and

subject to the terms and conditions hereinafter set forth.

 

     Section 2. Term. The term of employment under this Agreement shall begin on

the Effective Date, as such term is defined in the Debtors' Fourth Amended Joint

Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated June 3,

2005, as modified (the "Plan of Reorganization"), and, unless sooner terminated

as provided in Section 6, shall conclude on the first (1st) anniversary of the

Effective Date (the "Term"). At the Executive's request within the last six

months preceding the expiration of the Term, the Company shall, to the extent

practicable within two weeks after any such request but without any obligation,

provide the Executive with notice regarding whether the Company intends to renew

or extend the Term under this Agreement, terminate the employment relationship

between the parties on or shortly after the expiration of the Term or continue

the Executive's employment on an "at will" basis with no guaranteed term. Unless

the Executive's employment with the Company is terminated upon the expiration of

the Term or the Term under this Agreement is renewed or extended, the Executive

shall be employed by the Company after the Term on an "at will" basis.

 

      Section 3. Duties.

 

     (a) The Executive shall perform services consistent with the Executive's

position as the Chief Executive Officer, subject to the general supervision of

the Board of Directors of the Company ("Board"). The Executive will report to

the Board. The Executive will be responsible for directing the operations of the

Company and its

 

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operating subsidiaries, as well as the development of strategic objectives for

consideration of the Board. The Executive will have primary responsibility for

day-to-day operations, and the senior management will report to the Executive.

The Executive will keep the Board apprised and informed on a regular basis as to

all material pending matters or developments (including any such matters or

developments pending as of the date of this Agreement), and will consult, on a

regular basis, with the Vice Chairman of the Board on the status and operating

plans of the Company and all of its subsidiaries. For purposes of this Section

3(a), a "material pending matter or development" shall include, but not be

limited to, any indication, written or oral, which is known to the Executive and

which a reasonable business person would reasonably believe in good faith is

serious and credible regarding a potential transaction involving the Company,

any of its subsidiaries or any of the Company's or its subsidiaries' assets

which, in each case, if consummated, would involve in excess of ten million

dollars ($10,000,000), and any such indication shall be communicated by the

Executive to the Executive Committee of the Board promptly upon receipt of such

knowledge. The Executive hereby agrees to devote substantially all of his

business time to the faithful performance of such duties and to the promotion

and forwarding of the business and affairs of the Company for the Term provided,

however, that Executive shall be permitted to engage in (i) other activities of

a civic, religious, political or charitable nature, (ii) managing investments of

the Executive and the Executive's family in securities, mutual funds or other

collective investment funds, limited partner interests or similar passive

investments, (iii) corporate directorships and other business activities

described in Schedule I attached hereto, or (iv) such other activities as may

hereafter be specifically approved in writing, which in each case and in the

aggregate do not materially interfere with the performance of his obligations

hereunder, provided, further, however, that Executive may not engage in any such

activities that would result in the Executive being in Competition (as defined

in Section 8(d) below).

 

     (b) The Executive acknowledges and agrees that the Vice Chairman of the

Board will serve as Chairman of the Executive Committee of the Board. The Vice

Chairman (i) will have full discretion at all times to review the operation of

the business of the Company and its subsidiaries; (ii) will be entitled to

participate in all operational and strategic meetings, and (iii) will have full

access to all information relating to operations and, following advance

notification to the Executive, employees of the Company and its subsidiaries.

Each member of the Board ("Director") shall have, following advance notice to

the Executive, the same rights of the Vice Chairman set forth in clauses

(i),(ii) and (iii) of the immediately preceding sentence. The Vice Chairman and

any Director will have the right to bring any matter to the attention of the

Board for its consideration. The Executive shall use his reasonable best efforts

to timely facilitate compliance with any reasonable requests made by any

Director to an employee, taking into account all other duties and obligations of

such employee and their reasonable priorities.

 

 

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     Section 4. Compensation.

 

     (a) Salary. In consideration of the services rendered by the Executive

under this Agreement, the Company shall pay the Executive a base salary (the

"Base Salary") at the annual rate of $1,887,875.00. The Base Salary shall be

paid in such installments and at such times as the Company pays its salaried

executives and shall be subject to all necessary withholding taxes, FICA

contributions and similar deductions. The Compensation Committee ("Compensation

Committee") of the Board may review from time to time the Base Salary payable to

Executive hereunder and may, in its sole discretion, increase but not decrease,

the Executive's salary rate. In addition, the Base Salary shall be increased

effective April 22, 2006, by a percentage equal to the percentage change from

the beginning until the end of the immediately preceding calendar year in the

Annual Average All Items Index of the U.S. City Average Consumer Price Index for

All Urban Consumers (CPI-U), as published by the U.S. Bureau of Labor Statistics

or any successor index that may at the time have replaced such Index. Any such

increased salary shall be and become the "Base Salary" for purposes of this

Agreement.

 

     (b) Annual Bonus. The Company shall maintain an annual Management Incentive

Bonus program ("MIB Program") for corporate office executives, and Executive

shall be a participant in the MIB Program and shall be entitled to an annual

bonus to the extent payable under such program ("Annual Bonus"). The Executive's

target annual bonus opportunity under the MIB Program shall be forty-two and

one-half percent (42.5%) of the Executive's Base Salary (the "Target Annual

Bonus"). The Annual Bonus for the 2005 fiscal year under the MIB Program shall

be earned and determined in accordance with the terms and conditions heretofore

established by the Compensation Committee of the Board of Directors of Loral

Space & Communications Ltd. With respect to the Annual Bonus for the 2006 fiscal

year or any subsequent fiscal year, the Board shall, in its discretion,

establish the terms and conditions of the MIB Program and may amend the MIB

Program (other than by reducing the Target Annual Bonus percentage set forth

above) accordingly. The Annual Bonus shall be paid on or before March 15 of the

year following the year to which the Annual Bonus relates.

 

     Section 5. Benefits. In addition to the compensation detailed in Section 4

of this Agreement, the Executive shall be entitled to the following additional

benefits:

 

     (a) Paid Vacation. The Executive shall be entitled to paid vacation each

calendar year which shall be appropriate and consistent with his position.

 

     (b) SERP. Executive is entitled to, and since March 1, 2004, has been

receiving payment of, a retirement benefit at the annual rate of $250,000 for

his life under the Company's Supplemental Executive Retirement Plan ("SERP"). In

the event Executive has received an aggregate amount of SERP payments since

March 1, 2004, of less than $1,500,000 prior to his death, payment of the SERP

shall continue after the Executive's death to the Executive's designated

beneficiary or, if none, his estate until an aggregate amount of such SERP

payments is equal to $1,500,000.00. Except for the

 

 

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amount and terms of SERP benefits specifically described herein, Executive

hereby releases the Company and its directors, officers, employees and

affiliates from any and all claims he might otherwise have with respect to the

SERP.

 

     (c) Insurance Policy. The Company shall provide the Executive from the

Effective Date through the first anniversary of such date with a term life

insurance policy on the life of the Executive providing for a death benefit

equal to the lesser of (i) $11 million or (ii) the maximum amount of death

benefit that can be obtained for an aggregate annual premium of $300,000.00. The

Executive shall be entitled to designate the beneficiaries under such policy in

the event of the Executive's death or, if none, his estate shall be his

beneficiary.

 

     (d) Welfare Plans. During the Term, the Executive and/or the Executive's

family, as the case may be, shall be eligible for participation in and shall

receive all benefits under welfare benefit plans, programs, practices and

policies provided generally by the Company to similarly situated executives of

the Company (including, without limitation, any medical, prescription, dental,

disability, salary continuance, employee life, group life, accidental death and

travel accident insurance plans and programs that may be provided by the Company

from time to time). Such plans, programs, practices and policies are subject to

change from time to time by the Company.

 

     (e) Other Benefit Plans. During the Term, the Executive shall be entitled

to participate in all savings, retirement and pension plans (including the

Company's Supplemental Executive Retirement Plan), programs, practices and

policies applicable generally to similarly situated executives of the Company as

determined by the Board from time to time. Such plans, programs, practices and

policies are subject to change from time to time by the Company.

 

     (f) Perquisites and Other Benefits. During the Term, the Executive shall be

entitled to such additional perquisites and fringe benefits appertaining to his

position in accordance with any practice established by the Board. During the

Term, Executive shall be entitled to receive all benefits under any individual

welfare benefit arrangements (including life insurance coverage) or other

benefit arrangements currently in effect for such Executive in a manner

consistent with past practice, and such arrangements are listed on Schedule I

attached hereto.

 

     (g) Reimbursement of Expenses. The Company shall reimburse the Executive

for all reasonable and necessary expenses actually incurred by the Executive

directly in connection with the business affairs of the Company and the

performance of his duties hereunder, upon presentation of proper receipts or

other proof of expenditure and subject to such reasonable guidelines or

limitations provided by the Company from time to time. The Executive shall

comply with such reasonable limitations and reporting requirements with respect

to such expenses as the Board may establish from time to time.

 

     (h) Indemnification. In addition to indemnification obligations of the

Company pursuant to Section 8.7 of the Plan of Reorganization and the terms of

any

 

 

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officers' liability insurance carried by the Company, the Executive (and his

heirs, executors and administrators) shall be indemnified by the Company and its

successors and assigns pursuant to a separate Indemnification Agreement in the

form attached hereto as Exhibit A. The Executive shall be an insured person

under or otherwise covered by directors and officers liability insurance in an

amount consistent with past practice. The obligations of the Company pursuant to

this Section shall survive the expiration of the Term or Executive's voluntary

or involuntary termination or resignation for Good Reason.

 

     Section 6. Termination. This Agreement shall terminate at the end of the

Term. The Executive's employment may end earlier as follows:

 

     (a) Death. The employment of the Executive shall automatically terminate

upon the death of the Executive.

 

     (b) Disability. In the event of any physical or mental disability of the

Executive rendering the Executive substantially unable to perform his duties

hereunder for a period of at least 120 days out of any twelve-month period and

the further determination that the disability is permanent with regard to the

Executive's ability to return to work in his full capacity, the Executive's

employment shall be terminated on account of the Executive's disability. Any

determination of permanent disability shall be made by the Board in consultation

with a qualified physician or physicians selected by the Board and reasonably

acceptable to the Executive. The failure of the Executive to submit to a

reasonable examination by such physician or physicians shall act as an estoppel

to any objection by the Executive to the determination of disability by the

Board.

 

     (c) By the Company For Cause. The employment of the Executive may be

terminated by the Company for Cause (as defined below) at any time effective

upon written notice to the Executive; provided, however, that if such

termination is based upon any event set forth in clauses (iii), (iv), (v), (vi)

or (vii) below, Executive shall be given not less than ten (10) days prior

written notice by the Board of the intention to terminate him for Cause, such

notice to state in detail the particular act or acts or failure or failures to

act that constitute the grounds on which the proposed termination for Cause is

based, and Executive shall have ten (10) days after the date that such written

notice has been given to Executive in which to address the Board regarding any

such alleged act or failure to act. If the Board makes a determination that

Cause exists, the termination shall be effective on the date immediately

following the expiration of the ten (10) day notice period. For purposes hereof,

the term "Cause" shall mean that the Board has determined reasonably, in good

faith and based on credible evidence that one or more of the following has

occurred:

 

          (i) the Executive shall have been after the Effective Date convicted

     of, or shall have pleaded guilty or nolo contendere to, any felony or any

     other crime that would have constituted a felony under the laws of the

     State of New York;

 

 

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          (ii) the Executive shall have been indicted for any felony or any

     other crime that would have constituted a felony under the laws of the

     State of New York in connection with or arising from the Executive's

     employment with the Company;

 

          (iii) the Executive shall have breached in any material respect any

     material provision of Section 8 hereof;

 

          (iv) the Executive shall have committed any fraud, embezzlement,

     misappropriation of funds, or breach of fiduciary duty against the Company,

     in each case of a material nature;

 

          (v) the Executive shall have engaged in any willful misconduct

     resulting in or reasonably likely to result in a material loss to the

     Company or substantial damage to its reputation;

 

          (vi) the Executive shall have willfully breached in any material

     respect any material provision of the Company's Code of Conduct and, to the

     extent any such breach is curable, the Executive shall have failed to cure

     such breach within ten (10) days after written notice of the alleged breach

     is provided to the Executive; or

 

          (vii) the Executive shall have willfully breached in any material

     respect any material provision of Section 3 hereof.

 

     (d) By the Company without Cause. The Company may terminate the Executive's

employment at any time without Cause effective upon written notice to the

Executive.

 

     (e) By the Executive Voluntarily. The Executive may terminate his

employment at any time effective upon at least thirty (30) days prior written

notice to the Company.

 

     (f) By the Executive for Good Reason. The Executive may terminate his

employment for Good Reason by providing the Company thirty (30) days' written

notice setting forth in reasonable specificity the event that constitutes Good

Reason, within sixty (60) days of the occurrence of such event. During such

thirty (30) day notice period, the Company shall have a cure right (if curable),

and, if not cured within such period, Executive's termination will be effective

upon the expiration of such cure period. For this purpose, the term "Good

Reason" shall mean:

 

     (i)