EXECUTION COPY

NON-QUALIFIED
STOCK OPTION AGREEMENT

UNDER

LORAL SPACE & COMMUNICATIONS INC.
2005 STOCK INCENTIVE PLAN

THIS AGREEMENT, made as of this 19th day of June, 2006 (the “Grant Date”), by
and between Loral Space & Communications Inc., a Delaware corporation (the
“Company”), and Dean A. Olmstead (the “Optionee”).

WHEREAS, the Optionee is employed by or is providing services to the Company or
an Affiliate in a key capacity, and the Company desires to afford Optionee the
opportunity to acquire the Company’s Common Stock, par value $.01 per share (the
“Stock”), so that Optionee may have a direct proprietary interest in the
Company’s success;

WHEREAS, all capitalized terms not otherwise defined herein shall have the same
meaning as set forth in Company’s 2005 Stock Incentive Plan (the “Plan”); and

WHEREAS, the Company and the Optionee have entered into a Consulting Agreement
dated June 7, 2006 (the “Consulting Agreement”); and

WHEREAS, the Company intends to seek shareholder and any other necessary
approvals required to amend the Plan to increase the number of shares available
for grant thereunder (the “Approvals”).

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

1. Grant of Option. Subject to the terms and conditions set forth herein and in
the Plan, and subject to obtaining the Approvals, the Company hereby grants to
the Optionee, during the period commencing on the Grant Date and ending on the
date that is seven years from the Grant Date (the “Option Period”), the right
and option (the right to purchase any one share of Stock hereunder being an
“Option”) to purchase from the Company, at an exercise price of $26.52 per share
(the “Option Price”), an aggregate of 120,000 shares of Stock. The Options are
not intended to be “incentive stock options,” as defined in Section 422 of the
Internal Revenue Code of 1986, as amended.

2. Vesting and Exercisability of Options.

(a) Subject to the terms and conditions set forth herein and provided the
Optionee’s employment or service continues,

  (X)   20,000 of the Options (the “Base Grant Options”) shall vest and become
exercisable in accordance with the following schedule:

(i) one-fourth of the Base Grant Options shall vest and become exercisable on
the one-year anniversary of the Grant Date;

(ii) an additional one-fourth of the Base Grant Options shall vest and become
exercisable on the two-year anniversary of the Grant Date;

(iii) an additional one-fourth of the Base Grant Options shall vest and become
exercisable on the three-year anniversary of the Grant Date; and

(iv) the remainder of the Base Grant Options shall vest and become exercisable
on the four-year anniversary of the Grant Date;

provided, however, that in the event of a Termination Event (as defined in the
Consulting Agreement), the next full tranche of unvested Base Grant Options that
would have vested on the next vesting date following such Termination Event
shall vest and become exercisable; and

  (Y)   100,000 of the Options (the “Performance Based Options”) shall vest and
become exercisable in accordance with the following schedule:

(i) 25,000 of the Performance Based Options shall vest and become exercisable
upon closing of a satellite services business transaction with a value to the
Company of between $100 million and less than $250 million;

(ii) 50,000 of the Performance Based Options shall vest and become exercisable
upon closing of a satellite services business transaction with a value to the
Company of between $250 million and less than $500 million;

(iii) 75,000 of the Performance Based Options shall vest and become exercisable
upon closing of a satellite services business transaction with a value to the
Company of between $500 million and less than $1,000 million; and

(iv) 100,000 of the Performance Based Options shall vest and become exercisable
upon closing of a satellite services business transaction with a value to the
Company of $1,000 million or more;

for the avoidance of doubt, for purposes of the above Performance Based Option
vesting schedule, in computing the value of a transaction, value shall mean
enterprise value, and, in the case of a transaction in which the Company is not
the sole participant, the Performance Based Options shall vest based on the
value of the transaction to the Company (e.g., if the Company acquires 40% of a
company with an enterprise valuation of $2 billion, the value of such
transaction to the Company would be $800 million). Further, for the avoidance of
doubt, in the case of an agreement entered into by the Company with respect to a
satellite services transaction with a value to the Company that would qualify
for vesting, vesting shall occur upon closing of such transaction
notwithstanding the occurrence of a Termination Event (as defined in the
Consulting Agreement) after signing but before closing;

provided, however, that no Options (including both the Base Grant Options and
the Performance Based Options) shall become exercisable (even though vested)
prior to the date on which the Approvals have been obtained and the Options that
would have become exercisable prior to the date the Approvals are obtained, but
for this prohibition on exercisability prior to the date the Approvals are
obtained, shall become exercisable on the date that the Approvals are obtained;
and further provided, however, that, except as otherwise set forth herein, no
vesting shall occur following the Optionee’s termination of employment or
service with the Company and all Affiliates.

(b) The Options shall vest only as to full shares of Stock rounded down to the
nearest full share during the first three vesting dates and all fractions shall
be amalgamated and become exercisable on the last vesting date. Except as
otherwise stated in this Agreement, the Options shall expire on the seven-year
anniversary of the Grant Date.

3. Exercisability following Termination of Employment or Service.

(a) If the Optionee’s employment or service with the Company and all Affiliates
is terminated for Cause, or if the Optionee resigns from employment or service
with the Company and all Affiliates other than for “Good Reason,” all Options
(whether vested or not) shall immediately expire.

(b) If the Optionee’s employment or service with the Company and all Affiliates
is terminated by the Company or an Affiliate other than for Cause or the
Optionee resigns for “Good Reason,” all Options that are vested at the time of
termination will remain outstanding and exercisable (but only to the extent such
Options are exercisable at the time of termination) until the earlier of
(i) three months following the termination of employment of the Optionee and
(ii) the expiration of the Option Period. All Options that are not vested at the
time of such termination shall immediately expire upon such termination of
employment.

(c) If the Optionee’s employment or service with the Company and all Affiliates
terminates on account of the Optionee’s death or Disability, all Options that
are vested at the time of such termination will remain outstanding and
exercisable (but only to the extent such Options are exercisable at the time of
such termination) until the earlier of (i) one year following the termination on
account of death or Disability of the Optionee (in the case of death, by the
executor or administrator of the estate of the Optionee) and (ii) the expiration
of the Option Period. All Options that are not vested at the time of such
termination shall immediately expire upon such termination of employment.

4. Method of Exercising Option.

(a) Options which have become exercisable may be exercised by delivery of
written notice of exercise to the Committee accompanied by payment of the Option
Price. Payment for shares of Stock acquired pursuant to Options shall be made in
full, upon exercise of the Options in immediately available funds in United
States dollars, by certified or bank cashier’s check or, in the discretion of
the Committee, (i) by surrender to the Company of Mature Shares held by the
Participant; (ii) by delivering to the Committee a copy of irrevocable
instructions to a stockbroker to deliver promptly to the Company an amount of
sale or loan proceeds sufficient to pay the aggregate Option exercise price;
(iii) through a net exercise of the Options whereby the Optionee instructs the
Company to withhold that number of shares of Stock having a fair market value
equal to the aggregate Option Price of the Options being exercised and deliver
to the Optionee the remainder of the shares subject to exercise or (iv) by any
other means approved by the Committee. For purposes of this paragraph, the term
“Mature Shares” shall mean shares of Stock for which the Optionee has good
title, free and clear of all liens and encumbrances, and which the Optionee
either (i) has held for at least six months or (ii) has purchased on the open
market.

(b) At the time of exercise, (i) the Company shall have the right to withhold
from the number of shares of Stock to be issued upon exercise, the minimum
number of shares necessary or (ii) at the discretion of the Committee, the
Optionee shall be obligated to pay to the Company such amount as the Company
deems necessary, in either event, to satisfy its obligation to withhold Federal,
state and local income or other taxes incurred by reason of the exercise or the
transfer of shares thereupon.

5. Issuance of Shares. As promptly as practical after receipt by the Company of
a written notice of exercise and full payment to the Company of the aggregate
Option Price and any required income tax withholding amount, the Company shall
issue or transfer to the Optionee the number of shares of Stock with respect to
which Options have been so exercised, or the net number of shares of Stock in
the event of an exercise pursuant to Section 4(a)(iii), or to the extent
applicable in Section 4(a)(iv), or after application of Section 4(b), or both,
and shall deliver to the Optionee (or the Optionee’s estate or beneficiary, if
applicable) a certificate or certificates therefore, registered in the name of
the Optionee (or such estate or beneficiary).

6. Non-Transferability. The Options are not transferable by the Optionee
otherwise than by will or the laws of descent and distribution and are
exercisable during the Optionee’s lifetime only by Optionee. No assignment or
transfer of the Options, or of the rights represented thereby, whether voluntary
or involuntary, by operation of law or otherwise (except by will or the laws of
descent and distribution), shall vest in the assignee or transferee any interest
or right herein whatsoever, but immediately upon such assignment or transfer the
Options shall terminate and become of no further effect.

7. Rights as Stockholder. Neither the Optionee nor a permitted transferee of the
Options shall have any rights as a stockholder with respect to any share of
Stock covered by the Options until the Optionee or any transferee shall have
become the holder of record of such share, and no adjustment shall be made for
dividends or distributions or other rights in respect of such share for which
the record date is prior to the date upon which the Optionee or any transferee
shall become the holder of record thereof.

8. Compliance with Law. Notwithstanding any of the provisions hereof, the
Optionee hereby agrees that Optionee will not exercise the Options, and that the
Company will not be obligated to issue or transfer any shares of Stock to the
Optionee hereunder, if the exercise hereof or the issuance or transfer of such
shares shall constitute a violation by the Optionee or the Company of any
provisions of any law or regulation of any governmental authority. Any
determination in this connection by the Committee shall be final, binding and
conclusive. The Company shall in no event be obliged to register any securities
pursuant to the Securities Act of 1933 (as now in effect or as hereafter
amended) or to take any other affirmative action in order to cause the exercise
of the Options or the issuance or transfer of shares of Stock pursuant thereto
to comply with any law or regulation of any governmental authority.

9. Notice. Every notice or other communication relating to this Agreement shall
be in writing, and shall be mailed to or delivered to the party for whom it is
intended at such address as may from time to time be designated by it in a
notice mailed or delivered to the other party as herein provided, provided that,
unless and until some other address be so designated, all notices or
communications by the Optionee to the Company shall be mailed or delivered to
the Company at its principal executive office, and all notices or communications
by the Company to the Optionee may be given to the Optionee personally or may be
mailed to Optionee at the Optionee’s last known address, as reflected in the
Company’s records.

10. Binding Effect. Subject to Section 6 hereof, this Agreement shall be binding
upon the heirs, executors, administrators and successors of the parties hereto.

11. Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the state of Delaware, without regard to the
principles of conflicts of law thereof.

12. Plan. The terms and provisions of the Plan are incorporated herein by
reference; provided, however, that upon an acceleration of vesting of the
Options in the event of a Change in Control, as provided in Section 13(a) of the
Plan, the Options shall not be exercisable unless the Approvals have been
obtained by the time the Change in Control occurs. In the event of a conflict or
inconsistency between discretionary terms and provisions of the Plan and the
express provisions of this Agreement, this Agreement shall govern and control.
Except as specifically provided herein, in all other instances of conflicts or
inconsistencies or omissions, the terms and provisions of the Plan shall govern
and control.

13. Section 409A. The Options are not intended to be considered “nonqualified
deferred compensation” within the meaning of Section 409A of the Code. It is
also intended that (i) the Option Price per share of Stock to be purchased
pursuant to any Option will never be less than the “fair market value”
(determined in a manner consistent with standards of Section 409A of the Code
and the guidance and regulations promulgated thereunder (the “409A Standards”))
of one share of Stock on the date of the grant of the Options, (ii) the transfer
or exercise of the Options will be subject to taxation pursuant to Section 83 of
the Code and Treas. Reg. §1.83-7; and (iii) no Option will include any feature
for the deferral of compensation, other than the deferral of recognition of
income until the later of exercise or disposition of the Option under Treas.
Reg. §1.83-7, or the time the Stock, acquired pursuant to the exercise of the
Option, first becomes substantially vested (as defined in Treas. Reg.
§1.83-3(b)). The Company shall indemnify and hold the Optionee harmless, on an
after tax basis, for any additional tax (including interest and penalties with
respect thereto) that may be imposed on the Optionee by Code Section 409A as a
result of the Options being granted subject to the Approvals (the “409A
Indemnity”). To the extent that the Options are considered nonqualified deferred
compensation subject to Section 409A of the Code, the Company and the Optionee
intend for this Agreement to comply with the 409A Standards. The Company
reserves the right to amend this Agreement at any time without the Optionee’s
consent to cause this Agreement, or any terms of this Agreement, to either
comply with or be exempt from Section 409A of the Code and the 409A Standards
and, upon any such amendment, the 409A Indemnity shall expire.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

LORAL SPACE & COMMUNICATIONS INC.

     
By:
Name:
Title:
  /s/ Michael B. Targoff
Michael B. Targoff
Chief Executive Officer

Accepted:

/s/ Dean A. Olmstead
Optionee—Dean A. Olmstead

Address

42 Wilkinson Way

Princeton, New Jersey 08540

     
Social Security Number