Loral Space
& Communications Inc.
600 Third Avenue, 36th Floor
New York, New York 10016
Loral Skynet
Corporation
c/o Loral Space & Communications Inc.
600 Third Avenue, 36th Floor
New York, New York 10016
December 14, 2006
Public Sector
Pension Investment Board
440 Laurier Avenue West
Ottawa, Ontario, K1R 7XR
4363205 Canada
Inc.
c/o McCarthy Tétrault LLP
Suite 4700, TD Bank Tower
Toronto Dominion Centre
Toronto, Ontario
M5K 1E6
4363213 Canada Inc.
c/o McCarthy
Tétrault LLP
Suite 4700, TD Bank Tower
Toronto Dominion Centre
Toronto, Ontario
M5K 1E6
This letter
agreement (the “ Restated Letter Agreement ”),
on the terms and subject to the conditions set forth herein, shall
amend and restate in its entirety that certain letter agreement
(the “ Original Letter Agreement ”), dated
December 4, 2006, from Loral Skynet Corporation (“
Skynet ”) and Loral Space & Communications Inc.
(“ Loral ”) to Public Sector Pension Investment
Board (“ PSP ” and together with Loral, the
“ Investors ”, and each an “
Investor ”), 4363213 Canada Inc. (the “
Purchaser ”) and 4363205 Canada Inc. (“
Holdco ”). The Restated Letter Agreement is being
executed in connection with the proposal (the “ Bid
”) to acquire 100% of the issued and outstanding equity
securities of Telesat Canada (the “ Corporation
”), and sets forth certain terms governing the actions of
Loral, PSP, Holdco and the Purchaser with respect to the Bid, and,
if that certain Share Purchase Agreement (the “ Purchase
Agreement ”), by and among the Purchaser, BCE Inc. (the
“ Seller ”) and the Corporation, is entered
into, such Purchase Agreement and all the transactions contemplated
thereby. Capitalized terms used and not defined herein have the
meanings set forth in the Original Letter Agreement (including by
reference to the Purchase Agreement) and the exhibits and schedules
thereto.
1.
Effectiveness . This Restated Letter Agreement shall
become effective on the date hereof and shall terminate (except
with respect to this Section 1 and Sections 10, 11, 13,
15, 16, 17, 18, 19 and 20 (subject to the provisions of
Section 20(b)) which Sections shall continue in full force and
effect) upon the first to occur of (i) the rejection of the
Bid by the Seller or the abandonment of the
Bid by Loral
and PSP or (ii) in the event that the Purchase Agreement is
executed by the parties thereto, the earlier of (A) the
occurrence of the Closing and (B) the termination of the
Purchase Agreement in accordance with its terms; provided
that any liability for failure to comply with the terms of this
Restated Letter Agreement shall survive the termination of this
Restated Letter Agreement.
2.
Management of Holdco and the Purchaser . The
Investors agree that from the date hereof until the termination of
this Restated Letter Agreement in accordance with Section 1,
(i) the board of directors of each of Holdco and the Purchaser
shall have two directors, which initially shall be Richard
Mastoloni and Derek Murphy, and (ii) the officers of each of
Holdco and the Purchaser initially shall be Richard Mastoloni and
Derek Murphy.
3.
Actions of Holdco and the Purchaser . Except as set
forth in the term sheet regarding the Skynet Contribution, as such
term is defined below, all actions and decisions of Holdco and the
Purchaser, including all actions and decisions relating to the Bid,
the Purchase Agreement, and the transactions contemplated thereby
(including actions and decisions relating to (i) any
negotiations relating to each of the Bid and the Purchase
Agreement, (ii) any waiver of, or determination of the
satisfaction or failure thereof of, any condition to closing
specified in the Purchase Agreement, and (iii) any subsequent
revision to the Bid or the amendment of the Purchase Agreement),
shall require the approval of each of the Investors.
4.
Debt Financing . All actions and decisions of Holdco
and the Purchaser with respect to debt financing (including with
respect to existing debt commitments) in connection with the
transactions contemplated by the Purchase Agreement shall require
the approval of each of the Investors. The Investors jointly may
cause Holdco and/or the Purchaser to negotiate, enter into and
borrow under, definitive agreements relating to debt financing to
be provided at the Closing. Each Investor acknowledges that it
approves of the amended and restated debt commitment letter, dated
December 14, 2006, regarding credit facilities in favor of
Holdco and submitted in connection with the Bid.
5.
Equity Commitment Letters . Each Investor
acknowledges that it approves of the form of, and has executed, as
of December 14, 2006, an equity commitment letter in favor of
Holdco (each, an “ Equity Commitment Letter ”),
with respect to each such Investor’s commitment to provide
equity financing in connection with the transactions contemplated
by the Bid and Purchase Agreement. In addition, each Investor
acknowledges that it approves of the form of, and has executed, as
of December 14, 2006, the guaranty letter agreement in favor
of the Seller (the “ Guaranty ”).
6.
Shareholders Agreement . Each Investor hereby agrees
that the form of the shareholders agreement attached hereto as
Schedule A (the “ Shareholders Agreement
”) reflects the agreement between the Investors with respect
to the principal terms of such Shareholders Agreement, and each
Investor further agrees to negotiate in good faith the final form
thereof. In the event that there is a change of law that allows
Loral to own additional shares of Holdco that can vote in the
election of directors, each Investor agrees to negotiate in good
faith changes to the provisions of the Shareholders Agreement
regarding board composition and governance, in addition to other
appropriate changes. In addition, each Investor approves the term
sheet for the Fixed Rate Preferred Shares, attached hereto as
Schedule B (the “ Preferred Term Sheet
”), and the capitalization of Holdco and the Corporation set
forth under “Ownership” in the purchaser disclosure
letter with exhibits included with the Bid. In the event that the
Investors receive the advice of their tax advisors and agree that
there would not be a material adverse tax consequence to Holdco
upon a holder of the Fixed Rate Preferred Shares having a right to
require redemption of such shares upon a change of control of
Holdco (if such change of control occurs within five years of the
closing date), the provisions under “Mandatory
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Redemption upon
a Change of Control” in the Preferred Term Sheet will be
revised to reflect such agreement, such that the reference to
“after the 5th anniversary of the closing date” will be
changed or deleted, if and as applicable.
7.
Contribution Agreement . (a) Loral agrees to
negotiate in good faith with PSP and enter into, and to cause Loral
Skynet Corporation (“ Skynet ”) to enter into,
as soon as reasonably practicable following the execution of the
Purchase Agreement, a contribution agreement (the “ Skynet
Contribution Agreement ”) with respect to certain assets
of Skynet being contributed to Holdco (the “ Skynet
Contribution ”), in form and substance reasonably
satisfactory to the Investors, reflecting the terms contained in
the term sheet attached as Schedule C (the “
Contribution Term Sheet ”), together with such changes
or other terms as may be mutually agreed by the Investors. PSP
shall have the right to take any action on behalf of Holdco and to
exercise all remedies on behalf of Holdco, in connection with the
performance of, and the exercise of any remedies under, the Skynet
Contribution Agreement at the expense of Holdco, and Holdco agrees
to indemnify and hold harmless PSP in connection
therewith.
(b) In
the event that the Closing of the Skynet Contribution has not
occurred by the first anniversary of the closing of the
transactions contemplated by the Purchase Agreement, Loral shall,
in consideration of Holdco issuing to Loral shares of Holdco common
and non-voting participating preferred stock sufficient to bring
Loral’s ownership to 33-1/3% of the vote and 64% of the
participating equity value of Holdco, (i) contribute to Holdco
the T11N Satellite (the “ T11N Contribution ”),
(ii) pay to Holdco US$175 million (the “
Financing Payment ”), and (iii) pay to Holdco an
additional amount in cash, if any, equal to the Loral Equity
Contribution less the sum of the Initial Loral Equity Contribution,
the T11N Contribution and the Financing Payment; provided, that, if
the sum of the T11N Contribution, the Financing Payment and the
Initial Loral Equity Contribution shall exceed the Loral Equity
Contribution, Holdco shall pay Loral in cash an amount equal to
such excess. The Investors agree to use commercially reasonable
efforts to obtain any and all necessary consents and approvals,
including, without limitation, regulatory approvals, as soon as
reasonably practicable in connection with the T11N Contribution.
The provisions of this Section 7 will terminate upon the
execution of the Contribution Agreement. Capitalized terms used in
this Section 7 and not defined herein shall have the meaning
given to such terms in the Contribution Term Sheet.
8.
Consulting Agreement . In connection with the Closing
of the transactions contemplated hereby, Loral and Purchaser will
enter into a consulting agreement (“ Consulting
Agreement ”) pursuant to which Loral will provide
consulting services to Holdco and its Subsidiaries for an aggregate
amount not to exceed $5 million per annum, which amount shall
include any and all overhead costs that Loral may attribute to
Holdco. The Consulting Agreement will terminate upon the first to
occur of (i) a sale of Holdco or (ii) a sale by Loral of
more than 50% of its participating equity interests in
Holdco.
9.
Management Arrangements . Each of the Investors
agrees that all actions and decisions regarding arrangements
following the Closing with members of management of each of Holdco
and the Purchaser shall require the approval of each Investor. The
Investors acknowledge that they are contemplating putting into
effect equity incentives for such management based on a 5% pool of
available equity and on other terms to be agreed by each
Investor.
10.
Expense Sharing Provisions . The Investors agree that
Loral shall bear 64% and PSP shall bear 36% of all third-party fees
and expenses, incurred by either of the Investors in connection
with the preparation and submission of the Bid, the negotiation of
the Purchase Agreement, and the taking of other actions
contemplated hereunder (including the expenses and fees of legal
counsel, accountants, financial advisors and other consultants and
advisors and any financing or other fees or
3
expenses
incurred by either Holdco or Purchaser (includ
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