Document:

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                                                                     Exhibit 4.1

                     SYNERGETIC MICRO SYSTEMS, INCORPORATED
                     STOCK OPTION PLAN (AS AMENDED ON 5/29/01))

I.       PURPOSE AND DEFINITIONS

         A.       PURPOSE OF THE PLAN

                  The Plan is intended to encourage ownership of Shares by
                  Eligible Employees and Key Non-Employees in order to attract
                  and retain such Eligible Employees in the employ of the
                  Company or an Affiliate, or to attract such Key Non-Employees
                  to provide services to the Company or an Affiliate, and to
                  provide additional incentive for such persons to promote the
                  success of the Company or an Affiliate.

         B.       DEFINITIONS

                  Unless otherwise specified or unless the context otherwise
                  requires, the following terms, as used in this Plan, have the
                  following meanings:

                  1. Affiliate means a corporation which, for purposes of
                     Section 424 of the Code, is a parent or subsidiary of the
                     Company, direct or indirect.

                  2. Board means the Board of Directors of the Company.

                  3. Code means the Internal Revenue Code of 1986, as amended.

                  4. Committee means the committee to which the Board delegates
                     the power to act under or pursuant to the provisions of the
                     Plan, or the Board if no committee is selected. If the
                     Board delegates powers to a committee, and if the Company
                     is or becomes subject to Section 16 of the Exchange Act,
                     then, if necessary for compliance therewith, such committee
                     shall consist initially of not less than two (2) members of
                     the Board, each member of which must be a "non-employee
                     director," within the meaning of the applicable rules
                     promulgated pursuant to the Exchange Act. If the Company is
                     or becomes subject to Section 16 of the Exchange Act, no
                     member of the Committee shall receive any Option pursuant
                     to the Plan or any similar plan of the Company or any
                     Affiliate while serving on the Committee unless the Board
                     determines that the grant of such an Option satisfies the
                     then current Rule 16b-3 requirements under the Exchange
                     Act. Notwithstanding anything herein to the contrary, and
                     insofar as the Board determines that it is desirable in
                     order for compensation recognized by Participants pursuant
                     to the Plan to be fully deductible to the Company for
                     federal income tax purposes, each member of the Committee
                     also shall be an "outside director" (as defined in
                     regulations or other guidance issued by the Internal
                     Revenue Service under Code Section 162(m)).

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                  5.  Common Stock means the common stock of the Company.

                  6.  Company means Synergetic Micro Systems, Incorporated, an
                      Illinois corporation, and includes any successor or
                      assignee corporation or corporations into which the
                      Company may be merged, changed, or consolidated; any
                      corporation for whose securities the securities of the
                      Company shall be exchanged; and any assignee of or
                      successor to substantially all of the assets of the
                      Company.

                  7.  Disability or Disabled means permanent and total
                      disability as defined in Section 22(e)(3) of the Code.

                  8.  Eligible Employee means an employee of the Company or of
                      an Affiliate (including, without limitation, an employee
                      who also is serving as an officer or director of the
                      Company or of an Affiliate), designated by the Board or
                      the Committee as being eligible to be granted one or more
                      Options under the Plan.

                  9.  Exchange Act means the Securities Exchange Act of 1934, as
                      amended from time to time, or any successor statute
                      thereto.

                  10. Incentive Option means an Option which, when granted, is
                      intended to be an "incentive stock option," as defined in
                      Section 422 of the Code.

                  11. Key Non-Employee means a non-employee director,
                      consultant,or independent contractor of the Company or of
                      an Affiliate who is designated by the Board or the
                      Committee as being eligible to be granted one or more
                      Options under the Plan.

                  12. Nonstatutory Option means an Option which, when granted,
                      is not intended to be an "incentive stock option," as
                      defined in Section 422 of the Code.

                  13. Option means a right or option granted under the Plan.

                  14. Option Agreement means an agreement between the Company
                      and a Participant executed and delivered pursuant to the
                      Plan.

                  15. Participant means an Eligible Employee to whom one or more
                      Incentive Options or Nonstatutory Options are granted
                      under the Plan, and a Key Non-Employee to whom one or more
                      Nonstatutory Options are granted under the Plan.

                  16. Plan means this Stock Option Plan, as amended from time to
                      time.

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                  17. Shares means the following shares of the capital stock of
                      the Company as to which Options have been or may be
                      granted under the Plan: treasury shares or authorized but
                      unissued Common Stock or any shares of capital stock into
                      which the Shares are changed or for which they are
                      exchanged within the provisions of Article VI of the Plan.

II.      SHARES SUBJECT TO THE PLAN

         The aggregate number of Shares as to which Options may be granted from
         time to time shall be 1,947,950 Shares (subject to adjustment for stock
         splits, stock dividends, and other adjustments described in Article VI
         hereof); provided, however, that if the Company is or becomes a
         publicly held corporation, as such term is defined under Section 162(m)
         of the Code, the aggregate number of Shares as to which Options may be
         granted in any calendar year to any one Eligible Employee shall not
         exceed 500,000 (subject to adjustment for stock splits, stock
         dividends, and other adjustments described in Article VI hereof).

         Shares subject to Options that are forfeited, terminated, expire
         unexercised, canceled by agreement of the Company and the Participant,
         settled in cash in lieu of Common Stock or in such manner that all or
         some of the Shares covered by such Options are not issued to a
         Participant, or are exchanged for Options that do not involve Common
         Stock, shall immediately become available for Options. In addition, if
         the exercise price of any Option is satisfied by tendering Shares to
         the Company (by actual delivery or attestation), only the number of
         Shares issued net of the Shares tendered shall be deemed delivered for
         purposes of determining the maximum number of Shares available for
         Options.

         Subject to the provisions of Article VI, the aggregate number of Shares
         as to which Incentive Options may be granted shall be subject to change
         only by means of an amendment of the Plan duly adopted by the Company
         and approved by the stockholders of the Company within one year before
         or after the date of the adoption of any such amendment.

III.     ADMINISTRATION OF THE PLAN

         The Plan shall be administered by the Committee. A majority of the
         Committee shall constitute a quorum at any meeting thereof (including
         by telephone conference) and the acts of a majority of the members
         present, or acts approved in writing by a majority of the entire
         Committee without a meeting, shall be the acts of the Committee for
         purposes of this Plan. The Committee may authorize one or more of its
         members or an officer of the Company to execute and deliver documents
         on behalf of the Committee. A member of the Committee shall not
         exercise any discretion respecting himself or herself under the Plan.
         The Board shall have the authority to remove, replace or fill any
         vacancy of any member of the Committee upon notice to the Committee and
         the affected member. Any member of the Committee may resign upon notice
         to the Board. The Committee may allocate among one or more of its
         members, or may delegate to one or more of its agents, such duties and
         responsibilities as it determines.

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         Subject to the provisions of the Plan, the Committee is authorized to:

         A. interpret the provisions of the Plan or of any Option or Option
            Agreement and to make all rules and determinations which it deems
            necessary or advisable for the administration of the Plan;

         B. determine which employees of the Company or of an Affiliate shall be
            designated as Eligible Employees and which of the Eligible Employees
            shall be granted Options;

         C. determine the Key Non-Employees to whom Nonstatutory Options shall
            be granted;

         D. determine whether the Option to be granted shall be an Incentive
            Option or Nonstatutory Option;

         E. determine the number of Shares for which an Option or Options shall
            be granted;

         F. provide for the acceleration of the right to exercise an Option (or
            portion thereof); and

         G. specify the terms and conditions upon which Options may be granted;

         provided, however, that with respect to Incentive Options, all such
         interpretations, rules, determinations, terms, and conditions shall be
         made and prescribed in the context of preserving the tax status of the
         Incentive Options as incentive stock options within the meaning of
         Section 422 of the Code.

         The Committee may delegate to the chief executive officer and to other
         senior officers of the Company or its Affiliates its duties under the
         Plan pursuant to such conditions or limitations as the Committee may
         establish, except that only the Committee may select, and grant Options
         to, Participants who are subject to Section 16 of the Exchange Act. All
         determinations of the Committee shall be made by a majority of its
         members. No member of the Committee shall be liable for any action or
         determination made in good faith with respect to the Plan or any
         Option.

IV.      ELIGIBILITY FOR PARTICIPATION

         The Committee may at any time and from time to time grant one or more
         Options to one or more Eligible Employees or Key Non-Employees and may
         designate the number of Shares to be subject to each Option so granted,
         provided, however, that (i) each Participant receiving an Incentive
         Option must be an Eligible Employee of the Company or of an Affiliate
         at the time an Incentive Option is granted; (ii) no Incentive Options
         shall be granted after the expiration of ten (10) years from the
         earlier of the date of the adoption of the Plan by the Company or the
         approval of the Plan by the stockholders of the Company; and (iii) the
         fair market value of the Shares (determined at the time the Option is
         granted) as

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         to which Incentive Options are exercisable for the first time by any
         Eligible Employee during any single calendar year (under the Plan and
         under any other incentive option plan of the Company or an Affiliate)
         shall not exceed $100,000.

         Notwithstanding the foregoing, if the Company is or becomes subject to
         Section 16 of the Exchange Act, then no individual who is a member of
         the Committee shall be eligible to receive an Option, unless the Board
         determines that the grant of the Option satisfies the then current Rule
         16b-3 requirements under the Exchange Act. If the Company is not
         subject to Section 16 of the Exchange Act, then no individual who is a
         member of the Committee shall be eligible to receive an Option under
         the Plan unless the granting of such Option shall be approved by the
         Committee, with all of the members voting thereon being disinterested
         members. For the purpose of this Article IV, a "disinterested member"
         shall be any member who shall not then be, or at any time within the
         year prior thereto have been, granted an Option under the Plan or any
         other plan of the Company or an Affiliate, other than an Option granted
         under a formula plan established by the Company or an Affiliate.

         Notwithstanding any of the foregoing provisions, (i) the Committee may
         authorize the grant of an Option to a person not then in the employ of
         or serving as a director, consultant, or independent contractor of the
         Company or of an Affiliate, conditioned upon such person becoming
         eligible to become a Participant at or prior to the execution of the
         Option Agreement evidencing the actual grant of such Option; and (ii)
         if the Company is not subject to the reporting requirements of Section
         13 or 15(d) of the Exchange Act, then the Committee may not authorize
         the grant of an Option under this Plan to a person who resides in the
         State of California.

V.       TERMS AND CONDITIONS OF OPTIONS

         Each Option shall be set forth in an Option Agreement, duly executed on
         behalf of the Company and by the Participant to whom such Option is
         granted. Except for the setting of the Option price under Paragraph A,
         no Option shall be granted and no purported grant of any Option shall
         be effective until such Option Agreement shall have been duly executed
         on behalf of the Company and by the Participant. Each such Option
         Agreement shall be subject to at least the following terms and
         conditions:

         A. OPTION PRICE

            The exercise price of the Shares covered by each Option granted
            under the Plan shall be determined by the Committee. In the case of
            an Incentive Option, if the optionee owns directly or by reason of
            the applicable attribution rules ten percent (10%) or less of the
            total combined voting power of all classes of share capital of the
            Company, the Option price (per share) of the Shares covered by each
            Incentive Option shall be not less than the "fair market value" of
            the Shares on the date of the grant of the Incentive Option. In all
            other cases of Incentive Options, the Option price shall be not less
            than one hundred ten percent (110%) of the said fair market value on
            the date of grant. If the Shares are listed on any national
            securities

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           exchange, the fair market value shall be the closing sales price, if
           any, on the largest such exchange on the date of the grant of the
           Option, or, if none, on the most recent trade date thirty (30) days
           or less prior to the date of the grant of the Option. If the Shares
           are not then listed on any such exchange, the fair market value of
           such Shares shall be the closing sales price if such is reported or
           otherwise the mean average of the closing "Bid" and the closing "Ask"
           prices, if any, as reported on the National Association of Securities
           Dealers Automated Quotation System ("NASDAQ") for the date of the
           grant of the Option, or if none, on the most recent trade date thirty
           (30) days or less prior to the date of the grant of the Option for
           which such quotations are reported. If the Shares are not then either
           listed on any such exchange or quoted on NASDAQ, the fair market
           value shall be the mean between the average of the "Bid" and the
           average of the "Ask" prices, if any, as reported in the National
           Daily Quotation Service for the date of the grant of the Option, or,
           if none, for the most recent trade date thirty (30) days or less
           prior to the date of the grant of the Option for which such
           quotations are reported. If the fair market value cannot be
           determined under the preceding three sentences, it shall be
           determined in good faith by the Committee.

     B.    NUMBER OF SHARES

           Each Option shall state the number of Shares to which it pertains.

     C.    TERM OF OPTION

           Each Incentive Option shall terminate not more than ten (10) years
           from the date of the grant thereof, or at such earlier time as the
           Option Agreement may provide, and shall be subject to earlier
           termination as herein provided, except that if the Option price is
           required under Paragraph A of this Article V to be at least one
           hundred ten percent (110%) of fair market value, each such Incentive
           Option shall terminate not more than five (5) years from the date of
           the grant thereof, and shall be subject to earlier termination as
           herein provided.

     D.    DATE OF EXERCISE

           Upon the authorization of the grant of an Option, or at any time
           thereafter, the Committee may, subject to the provisions of Paragraph
           C of this Article V, prescribe the date or dates on which the Option
           becomes exercisable, and may provide that the Option rights become
           exercisable in installments over a period of years, or upon the
           attainment of stated goals. It is expressly understood that Options
           hereunder shall, unless otherwise provided for by the Committee, be
           granted in contemplation of, and earned by the Participant through
           the completion of, future employment or service with the Company.

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     E.    MEDIUM OF PAYMENT

           The Option price shall be paid on the date of purchase specified in
           the notice of exercise, as set forth in Paragraph I. It shall be paid
           in such form (permitted by Section 422 of the Code in the case of
           Incentive Options) as the Committee shall, either by rules
           promulgated pursuant to the provisions of Article III of the Plan, or
           in the particular Option Agreement, provide.

     F.    TERMINATION OF EMPLOYMENT

           1.    A Participant who ceases to be an employee or Key Non-Employee
                 of the Company or of an Affiliate for any reason other than
                 death, Disability, or termination for cause, may exercise any
                 Option granted to such Participant, to the extent that the
                 right to purchase Shares thereunder has become exercisable by
                 the date of such termination, but only within one (1) (or such
                 other period of time as the Committee may determine, with such
                 determination in the case of an Incentive Option being made at
                 the time of the grant of the Option and not exceeding three (3)
                 months) month after such date, or, if earlier, within the
                 originally prescribed term of the Option, and subject to the
                 condition that no Option shall be exercisable after the
                 expiration of the term of the Option. A Participant's
                 employment shall not be deemed terminated by reason of a
                 transfer to another employer which is the Company or an
                 Affiliate.

           2.    A Participant who ceases to be an employee or Key Non-Employee
                 for cause shall, upon such termination, cease to have any right
                 to exercise any Option. For purposes of this Plan, cause shall
                 be deemed to include (but shall not be limited to) wrongful
                 appropriation of funds of the Company or an Affiliate,
                 divulging confidential information about the Company or an
                 Affiliate to the public, the commission of a gross misdemeanor
                 or felony, or the performance of any other action that the
                 Board or the Committee, in their sole discretion, may deem to
                 be sufficiently injurious to the interests of the Company or an
                 Affiliate to constitute substantial cause for termination. The
                 determination of the Board or the Committee as to the existence
                 of cause shall be conclusive and binding upon the Participant
                 and the Company.

           3.    Except as the Committee may otherwise expressly provide or
                 determine (consistent with Section 422 of the Code, if
                 applicable), a Participant who is absent from work with the
                 Company or an Affiliate because of temporary disability (any
                 disability other than a permanent and total Disability as
                 defined at Paragraph B(7) of Article I hereof), or who is on
                 leave of absence for any purpose permitted by the Company or by
                 any authoritative interpretation (i.e., regulation, ruling,
                 case law, etc.) of Section 422 of the Code, shall not, during
                 the period of any such absence, be deemed, by virtue

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                 of such absence alone, to have terminated his or her employment
                 or relationship with the Company or with an Affiliate.

           4.    Paragraph F(1) shall control and fix the rights of a
                 Participant who ceases to be an employee or Key Non-Employee of
                 the Company or of an Affiliate for any reason other than death,
                 Disability, or termination for cause, and who subsequently
                 becomes Disabled or dies. Nothing in Paragraphs G and H of this
                 Article V shall be applicable in any such case except that, in
                 the event of such a subsequent Disability or death within the
                 three (3) month period after the termination of employment or,
                 if earlier, within the originally prescribed term of the
                 Option, the Participant or the Participant's estate or personal
                 representative may exercise the Option permitted by this
                 Paragraph F, in the event of Disability, within twelve (12)
                 months after the date that the Participant ceased to be an
                 employee or Key Non-Employee of the Company or of an Affiliate
                 or, in the event of death, within twelve (12) months after the
                 date of death of such Participant.

     G.    TOTAL AND PERMANENT DISABILITY

           A Participant who ceases to be an employee or Key Non-Employee of the
           Company or of an Affiliate by reason of Disability may exercise any
           Option granted to such Participant to the extent that the right to
           purchase Shares thereunder has become exercisable on or before the
           date such Participant becomes Disabled as determined by the
           Committee.

           A Disabled Participant, or his estate or personal representative,
           shall exercise such rights, if at all, only within a period of not
           more than twelve (12) months after the date that the Participant
           became Disabled as determined by the Committee (notwithstanding that
           the Participant might have been able to exercise the Option as to
           some or all of the Shares on a later date if the Participant had not
           become Disabled) or, if earlier, within the originally prescribed
           term of the Option.

     H.    DEATH

           In the event that a Participant to whom an Option has been granted
           ceases to be an employee or Key Non-Employee of the Company or of an
           Affiliate by reason of such Participant's death, such Option, to the
           extent that the right is exercisable but not exercised on the date of
           death, may be exercised by the Participant's estate or personal
           representative within twelve (12) months after the date of death of
           such Participant or, if earlier, within the originally prescribed
           term of the Option, notwithstanding that the decedent might have been
           able to exercise the Option as to some or all of the Shares on a
           later date if the Participant were alive and had continued to be an
           employee or Key Non-Employee of the Company or of an Affiliate.

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     I.    EXERCISE OF OPTION AND ISSUE OF STOCK

           Options shall be exercised by giving written notice to the Company.
           Such written notice shall: (l) be signed by the person exercising the
           Option, (2) state the number of Shares with respect to which the
           Option is being exercised, (3) contain the warranty required by
           paragraph M of this Article V, and (4) specify a date (other than a
           Saturday, Sunday or legal holiday) not less than five (5) nor more
           than ten (10) days after the date of such written notice, as the date
           on which the Shares will be purchased. Such tender and conveyance
           shall take place at the principal office of the Company during
           ordinary business hours, or at such other hour and place agreed upon
           by the Company and the person or persons exercising the Option. On
           the date specified in such written notice (which date may be extended
           by the Company in order to comply with any law or regulation which
           requires the Company to take any action with respect to the Option
           Shares prior to the issuance thereof, whether pursuant to the
           provisions of Article VI or otherwise), the Company shall accept
           payment for the Option Shares and shall deliver to the person or
           persons exercising the Option in exchange therefor an appropriate
           certificate or certificates for fully paid non-assessable Shares. In
           the event of any failure to take up and pay for the number of Shares
           specified in such written notice on the date set forth therein (or on
           the extended date as above provided), the right to exercise the
           Option shall terminate with respect to such number of Shares, but
           shall continue with respect to the remaining Shares covered by the
           Option and not yet acquired pursuant thereto.

     J.    RIGHTS AS A STOCKHOLDER

           No Participant to whom an Option has been granted shall have rights
           as a stockholder with respect to any Shares covered by such Option
           except as to such Shares as have been issued to or registered in the
           Company's share register in the name of such Participant upon the due
           exercise of the Option and tender of the full Option price.

     K.    ASSIGNABILITY AND TRANSFERABILITY OF OPTION

           Unless otherwise permitted by the Code and by Rule 16b-3 of the
           Exchange Act, if applicable, and approved in advance by the
           Committee, an Option granted to a Participant shall not be
           transferable by the Participant and shall be exercisable, during the
           Participant's lifetime, only by such Participant or, in the event of
           the Participant's incapacity, his guardian or legal representative.
           Except as otherwise permitted herein, such Option shall not be
           assigned, pledged or hypothecated in any way (whether by operation of
           law or otherwise) and shall not be subject to execution, attachment,
           or similar process. Any attempted transfer, assignment, pledge,
           hypothecation or other disposition of any Option or of any rights
           granted thereunder contrary to the provisions of this Paragraph K, or
           the levy of any attachment or similar process upon an Option or such
           rights, shall be null and void.

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     L.    OTHER PROVISIONS

           The Option Agreement for an Incentive Option shall contain such
           limitations and restrictions upon the exercise of the Option as shall
           be necessary in order that such Option can be an "incentive stock
           option" within the meaning of Section 422 of the Code. Further, the
           Option Agreements authorized under the Plan shall be subject to such
           other terms and conditions including, without limitation,
           restrictions upon the exercise of the Option, as the Committee shall
           deem advisable and which, in the case of Incentive Options, are not
           inconsistent with the requirements of Section 422 of the Code.

     M.    PURCHASE FOR INVESTMENT

           Unless the Shares to be issued upon the particular exercise of an
           Option shall have been effectively registered under the Securities
           Act of 1933, as now in force or hereafter amended, the Company shall
           be under no obligation to issue the Shares covered by such exercise
           unless and until the following conditions have been fulfilled. In
           accordance with the direction of the Committee, the persons who
           exercise such Option shall warrant to the Company that, at the time
           of such exercise, such persons are acquiring their Option Shares for
           investment and not with a view to, or for sale in connection with,
           the distribution of any such Shares, and shall make such other
           representations, warranties, acknowledgments and affirmations, if
           any, as the Committee may require. In such event, the persons
           acquiring such Shares shall be bound by the provisions of the
           following legend (or similar legend) which shall be endorsed upon the
           certificate(s) evidencing their Option Shares issued pursuant to such
           exercise.

                   "The shares represented by this certificate have been
                   acquired for investment and they may not be sold or otherwise
                   transferred by any person, including a pledgee, in the
                   absence of an effective registration statement for the shares
                   under the Securities Act of 1933 or an opinion of counsel
                   satisfactory to the Company that an exemption from
                   registration is then available."

                   "The shares of stock represented by this certificate are
                   subject to the terms and conditions of a certain Option
                   Agreement dated as of _________, 20__, between the Company
                   and the optionee. A copy of the Agreement is on file in the
                   office of the Secretary of the Company. The Agreement
                   provides, among other things, for restrictions upon the
                   holder's right to transfer the shares represented hereby, and
                   for certain prior rights to purchase and certain obligations
                   to sell the shares of common stock evidenced by this
                   certificate at a designated purchase price determined in
                   accordance with certain procedures. Any attempted transfer of
                   these shares other than in compliance with the Agreement
                   shall be void and of no effect. By accepting the shares of
                   stock evidenced by this certificate, any permitted transferee
                   agrees to be bound by all of the terms and conditions of said
                   Agreement."

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         Without limiting the generality of the foregoing, the Company may delay
         issuance of the Shares until completion of any action or obtaining any
         consent that the Company deems necessary under any applicable law
         (including without limitation state securities or "blue sky" laws).

VI.  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; SALE OF COMPANY

     If the outstanding Shares of the Company are changed into or exchanged for
     a different number or kind of shares or other securities of the Company or
     of another corporation by reason of any reorganization, merger, or
     consolidation, or if a change is made to the Common Stock of the Company by
     reason of any recapitalization, reclassification, change in par value,
     stock split, reverse stock split, combination of shares or dividend payable
     in capital stock, or the like, the Company shall make adjustments to such
     Options (including, by way of example and not by way of limitation, the
     grant of substitute options under the Plan or under the plan of such other
     corporation) as it may determine to be appropriate under the circumstances,
     and, in addition, appropriate adjustments shall be made in the number and
     kind of shares and in the option price per share subject to outstanding
     options under the Plan or under the plan of such successor corporation. No
     such adjustment shall be made which shall, within the meaning of Section
     424 of the Code, constitute such a modification, extension, or renewal of
     an option as to cause the adjustment to be considered as the grant of a new
     option.

     Notwithstanding anything herein to the contrary, the Company may, in its
     sole discretion, accelerate the timing of the exercise provisions of any
     Option in the event of (i) the adoption of a plan of merger or
     consolidation under which all the Shares of the Company would be
     eliminated, or (ii) a sale of all or substantially all of the Company's
     assets or Shares. Alternatively, the Company may, in its sole discretion,
     cancel any or all Options upon any of the foregoing events and provide for
     the payment to Participants in cash of an amount equal to the difference
     between the Option price and the price of a Share, as determined in good
     faith by the Committee, at the close of business on the date of such event,
     multiplied by the number of Shares subject to Option so canceled. The
     preceding two sentences of this Article VI notwithstanding, the Company
     shall be required to accelerate the timing of the exercise provisions of
     any Option if (i) any such business combination is to be accounted for as a
     pooling-of-interests under APB Opinion 16 (or any successor opinion) and
     (ii) the timing of such acceleration does not prevent such
     pooling-of-interests treatment; provided, moreover, that if any provision
     of the Plan or Option Agreement would disqualify the combination from
     pooling-of-interests accounting treatment, then the Plan and Option
     Agreement shall be interpreted to preserve such accounting treatment or, if
     necessary, the applicable provision shall be null and void. All
     determinations to be made in connection with the preceding sentence shall
     be made by the independent accounting firm whose opinion with respect to
     the pooling-of-interests treatment is required as a condition to the
     Company's consummation of such combination.

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      Upon a business combination by the Company or any of its Affiliates with
      any corporation or other entity through the adoption of a plan of merger
      or consolidation or a share exchange or through the purchase of all or
      substantially all of the capital stock or assets of such other corporation
      or entity, the Board or the Committee may, in its sole discretion, grant
      Options pursuant hereto to all or any persons who, on the effective date
      of such transaction, hold outstanding options to purchase securities of
      such other corporation or entity and who, on and after the effective date
      of such transaction, will become employees or directors of, or consultants
      to, the Company or its Affiliates. The number of Shares subject to such
      substitute Options shall be determined in accordance with the terms of the
      transaction by which the business combination is effected. Notwithstanding
      the other provisions of this Plan, the other terms of such substitute
      Options shall be substantially the same as or economically equivalent to
      the terms of the options for which such Options are substituted, all as
      determined by the Board or by the Committee, as the case may be. Upon the
      grant of substitute Options pursuant hereto, the options to purchase
      securities of such other corporation or entity for which such Options are
      substituted shall be canceled immediately.

VII.  DISSOLUTION OR LIQUIDATION OF THE COMPANY

      Upon the dissolution or liquidation of the Company other than in
      connection with a transaction to which the preceding Article VI is
      applicable, all Options granted hereunder shall terminate and become null
      and void; provided, however, that if the rights of a Participant under the
      applicable Options have not otherwise terminated and expired, the
      Participant shall have the right immediately prior to such dissolution or
      liquidation to exercise any Option granted hereunder to the extent that
      the right to purchase shares thereunder has become exercisable as of the
      date immediately prior to such dissolution or liquidation.

VIII. TERMINATION OF THE PLAN

      The Plan shall terminate (10) years from the earlier of the date of its
      adoption or the date of its approval by the stockholders. The Plan may be
      terminated at an earlier date by vote of the stockholders or the Board;
      provided, however, that any such earlier termination shall not affect any
      Options granted or Option Agreements executed prior to the effective date
      of such termination. Except as may otherwise be provided for under
      Articles VI and VII, and notwithstanding the termination of the Plan, any
      Options granted prior to the effective date of the Plan's termination may
      be exercised until the earlier of (i) the date set forth in the Option
      Agreement, or (ii) ten (10) years from the date the Option is granted, and
      the provisions of the Plan with respect to the full and final authority of
      the Committee under the Plan shall continue to control.

IX.   AMENDMENT OF THE PLAN

      The Plan may be amended by the Board and such amendment shall become
      effective upon adoption by the Board; provided, however, that any
      amendment shall be subject to the approval of the stockholders of the
      Company at or before the next annual meeting of

                                       12

<PAGE>

      the stockholders of the Company if such stockholder approval is required
      by the Code, any federal or state law or regulation, the rules of any
      stock exchange or automated quotation system on which the Shares may be
      listed or quoted, or if the Board, in its discretion, determines to submit
      such changes to the Plan to its stockholders for approval.

X.    EMPLOYMENT RELATIONSHIP

      Nothing herein contained shall be deemed to prevent the Company or an
      Affiliate from terminating the employment of a Participant, nor to prevent
      a Participant from terminating the Participant's employment with the
      Company or an Affiliate, unless otherwise limited by an agreement between
      the Company (or an Affiliate) and the Participant.

XI.   INDEMNIFICATION OF COMMITTEE

      In addition to such other rights of indemnification as they may have as
      directors or as members of the Committee, the members of the Committee
      shall be indemnified by the Company against all reasonable expenses,
      including attorneys' fees, actually and reasonably incurred in connection
      with the defense of any action, suit or proceeding, or in connection with
      any appeal therein, to which they or any of them may be a party by reason
      of any action taken by them as members of the Committee and against all
      amounts paid by them in settlement thereof (provided such settlement is
      approved by independent legal counsel selected by the Company) or paid by
      them in satisfaction of a judgment in any such action, suit or proceeding,
      except in relation to matters as to which it shall be adjudged in such
      action, suit or proceeding that the Committee member is liable for gross
      negligence or willful misconduct in the performance of his or her duties.
      To receive such indemnification, a Committee member must first offer in
      writing to the Company the opportunity, at its own expense, to defend any
      such action, suit or proceeding.

XII.  MITIGATION OF EXCISE TAX

      Unless otherwise provided for in the Option Agreement or in any other
      agreement between the Company (or an Affiliate) and the Participant, if
      any payment or right accruing to a Participant under this Plan (without
      the application of this Article XII), either alone or together with other
      payments or rights accruing to the Participant from the Company or an
      Affiliate ("Total Payments") would constitute a "parachute payment" (as
      defined in Section 280G of the Code and regulations thereunder), such
      payment or right shall be reduced to the largest amount or greatest right
      that will result in no portion of the amount payable or right accruing
      under the Plan being subject to an excise tax under Section 4999 of the
      Code or being disallowed as a deduction under Section 280G of the Code.
      The determination of whether any reduction in the rights or payments under
      this Plan is to apply shall be made by the Company. The Participant shall
      cooperate in good faith with the Company in making such determination and
      providing any necessary information for this purpose.

                                       13

<PAGE>

XIII. SAVINGS CLAUSE

      This Plan is intended to comply in all respects with applicable law and
      regulations, including, (i) with respect to those Participants who are
      officers or directors for purposes of Section 16 of the Exchange Act, Rule
      16b-3 of the Securities and Exchange Commission, if applicable, and (ii)
      with respect to executive officers, Code Section 162(m). In case any one
      or more provisions of this Plan shall be held invalid, illegal, or
      unenforceable in any respect under applicable law and regulation
      (including Rule 16b-3 and Code Section 162(m)), the validity, legality,
      and enforceability of the remaining provisions shall not in any way be
      affected or impaired thereby and the invalid, illegal, or unenforceable
      provision shall be deemed null and void; however, to the extent permitted
      by law, any provision that could be deemed null and void shall first be
      construed, interpreted, or revised retroactively to permit this Plan to be
      construed in compliance with all applicable law (including Rule 16b-3 and
      Code Section 162(m)) so as to foster the intent of this Plan.
      Notwithstanding anything herein to the contrary, with respect to
      Participants who are officers and directors for purposes of Section 16 of
      the Exchange Act, no grant of an Option to purchase Shares shall permit
      unrestricted ownership of Shares by the Participant for at least six (6)
      months from the date of the grant of such Option, unless the Board
      determines that the grant of such Option to purchase Shares otherwise
      satisfies the then current Rule 16b-3 requirements.

XIV.  WITHHOLDING

      Except as otherwise provided by the Committee,

      A.  The Company shall have the power and right to deduct or withhold, or
          require a Participant to remit to the Company, an amount sufficient to
          satisfy the minimum federal, state, and local taxes required by law to
          be withheld with respect to any grant, exercise, or payment made under
          or as a result of this Plan; and

      B.  In the case of any taxable event hereunder, a Participant may elect,
          subject to the approval in advance by the Committee, to satisfy the
          withholding requirement, if any, in whole or in part, by having the
          Company withhold Shares of Common Stock that would otherwise be
          transferred to the Participant having a Fair Market Value, on the date
          the tax is to be determined, equal to the minimum marginal tax that
          could be imposed on the transaction. All elections shall be made in
          writing and signed by the Participant.

XV.   EFFECTIVE DATE

      This Plan shall become effective upon adoption by the Board, provided that
      within one (1) year before or after such adoption by the Board (or within
      such earlier time period as may be required by the Exchange Act, if
      applicable) the Plan is approved by the stockholders of the Company. If
      such approval is not obtained, then this Plan and all Options granted
      hereunder shall be null and void ab initio.

                                       14

<PAGE>

XVI.  GOVERNING LAW

      This Plan shall be governed by the laws of the State of Illinois and
      construed in accordance therewith.

Adopted this 17th day of October, 2000.

                                       15<PAGE>

                                                                       EXECUTION

                                    AGREEMENT

     This agreement (this "Agreement") is made and entered into as of October
15, 2001, by and among Loral Cyberstar, Inc. (formerly Orion Network Systems,
Inc.) (the "Company"), Loral Space & Communications Ltd. ("Loral Ltd."), Loral
SpaceCom Corporation ("LSC", and the Company, Loral Ltd. and LSC being referred
to as the "Loral Entities"), and certain holders of the Company's 11 1/4% Senior
Notes due 2007 (the "Senior Notes") and the Company's 12 1/2% Senior Discount
Notes due 2007 (the "Senior Discount Notes", and together with the Senior Notes,
the "Existing Notes") which holders are signatories hereto from time to time
(each individually a "Consenting Holder", and collectively the "Consenting
Holders").

                                    RECITALS

     WHEREAS, LSC is a wholly owned indirect subsidiary of Loral Ltd. and is the
holder of a demand note issued by the Company in the approximate aggregate
principal amount outstanding as of the date hereof of $79,700,000 (the "LSC
Note");

     WHEREAS, the Company is a wholly owned indirect subsidiary of Loral Ltd.;

     WHEREAS, the Company, Loral Ltd., LSC and the Consenting Holders (each a
"Party" and collectively the "Parties") have engaged in good faith negotiations
with the objective of reaching an agreement with regard to restructuring the
Senior Notes, the Senior Discount Notes and the LSC Note;

     WHEREAS, the Parties now desire to implement a financial restructuring (the
"Financial Restructuring") and in order to implement the Financial
Restructuring, the Company intends, subject to the terms and conditions of this
Agreement, to make an exchange offer (the "Exchange Offer") to exchange each
Existing Note for (1) new notes due 2006 to be issued by the Company in the
aggregate principal amount equal to $675,000,000 (subject to adjustment) (the
"New Notes"), which New Notes shall be guaranteed by Loral Ltd., and (2) a
pro-rata share of five year warrants to purchase up to 6,657,096 common shares
of Loral Ltd. (representing as of June 30, 2001, 2% of Loral Ltd.'s outstanding
common stock) with an exercise price equal to 110% of the average of the daily
volume-weighted average trading prices of the common stock on the New York Stock
Exchange as reported by Bloomberg, L.P. for the ten consecutive trading days
preceding the second trading day prior to the closing of the Exchange Offer,
subject to normal and customary anti-dilution provisions, all as more fully
described in Schedule I attached hereto;

     WHEREAS, LSC desires as part of the Financial Restructuring to exchange the
LSC Note on the terms set forth on Schedule III hereto;

     WHEREAS, the Parties desire that, upon consummation of the Exchange Offer,
each of the Indentures with respect to the Senior Notes and Senior Discount
Notes, each dated January 31, 1997 (together, the "Indentures") shall be amended
to (a) effect the Exchange Offer, (b)

<PAGE>

make any changes to the Indentures, or waive compliance with any provisions
thereof that are deemed necessary or desirable by the Company to be made or
waived in order for the Company to be able to effect the foregoing and (c)
remove the operating restrictions contained in the Indenture, all as more fully
specified on Schedule II hereto (the "Proposed Amendments");

     WHEREAS, the Company desires to commence a consent solicitation of the
holders of the Existing Notes for the approval of the Proposed Amendments (the
"Consent Solicitation"); and

     WHEREAS, as a condition to its willingness to make the Exchange Offer, the
Company has required the Consenting Holders to agree, and the Consenting Holders
have agreed, among other things, (i) to consent to the Consent Solicitation, and
(ii) to tender pursuant to the Exchange Offer all of its Existing Notes, in each
case, on the terms and subject to the conditions provided for in this Agreement
and the Solicitation Material (as defined below);

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:

     1. Certain Covenants of the Company. The Company hereby covenants and
agrees to use its best efforts, and to take all reasonable steps necessary or
desirable, to:

     (a)  as promptly as practicable, prepare and file with the Securities and
          Exchange Commission a registration statement on Form S-4 relating to
          the Exchange Offer and the Consent Solicitation (the "Solicitation
          Materials"), in form and substance reasonably acceptable to the
          Consenting Holders, and thereupon commence the Exchange Offer and
          Consent Solicitation (it being understood and agreed that the
          Consenting Holders or their representatives will have the opportunity
          to review and comment on a draft of such Solicitation Materials);

     (b)  publicly disclose the terms of the transactions set forth herein
          within two (2) business days after the effectiveness of this agreement
          in accordance with Paragraph 11;

     (c)  as promptly as practicable after the commencement of the Exchange
          Offer and Consent Solicitation, and subject to the satisfaction or
          waiver of the conditions to consummation set forth in Paragraph 5,
          consummate the Exchange Offer and Consent Solicitation, and all
          related transactions; and

     (d)  as promptly as practicable after the date hereof (but not as a
          condition to consummation of the Exchange Offer and Consent
          Solicitation), obtain a rating of the New Notes by Standard &

                                       2

<PAGE>

          Poor's Ratings Group, a division of McGraw Hill, Inc. or Moody's
          Investors Service, Inc.

     2. Certain Covenants of Loral Ltd. Loral Ltd. hereby covenants and agrees
that it shall, upon satisfaction of the conditions to consummation set forth in
Paragraph 5, enter into a guaranty agreement with respect to the New Notes on
terms set forth in Schedule I.

     3. Certain Covenants of LSC. LSC hereby covenants and agrees that it shall,
upon satisfaction of the conditions to consummation set forth in Paragraph 6,
exchange the LSC Note on terms set forth in Schedule III.

     4. Certain Covenants of the Consenting Holders. Each of the Consenting
Holders hereby covenants and agrees for itself that, subject to the conditions
that the material terms of the Exchange Offer and Consent Solicitation are
consistent with the terms set forth in this Agreement and the schedules attached
hereto, and subject to the other terms herein, unless such Consenting Holder
shall have transferred all of its Existing Notes pursuant to Paragraph 6, it
shall:

     (a)  timely and validly tender its Senior Notes and Senior Discount Notes
          pursuant to the Exchange Offer and to provide its consent in favor of
          the Proposed Amendments to the Indentures (such tender and consent
          collectively called the "Consent");

     (b)  execute and deliver such other documentation as may be reasonably
          requested by the Company to evidence the Consent given hereunder; and

     (c)  not take any action that would impede, interfere with, delay, postpone
          or attempt to discourage the Exchange Offer or Consent Solicitation.

     5. Conditions to the Exchange Offer. The obligations of each Party to
consummate the transactions contemplated hereby is subject to the satisfaction
of each of the following conditions:

     (a)  receipt of the consent of the requisite percentage of the holders of
          each of the Senior Notes and the Senior Discount Notes to the Proposed
          Amendments, which amendments will not become effective unless the
          Exchange Offer is consummated;

     (b)  at least eighty-five percent (85%) in amount of the sum of (i) the
          aggregate principal amount of the Senior Notes and (ii) the aggregate
          accreted value of the Senior Discount Notes (such sum being herein
          called the "Accreted Amount") being validly tendered and not properly
          withdrawn;

                                       3

<PAGE>

     (c)  the execution of satisfactory documentation with respect to the New
          Notes;

     (d)  the delivery by each of the Loral Entities to the Consenting Holders
          and/or the indenture trustee for the New Notes of a usual and
          customary certificate of a responsible officer of such Loral Entity
          dated as of the closing date which states that all representations and
          warranties made by such Loral Entity in connection with this agreement
          and the transactions contemplated hereby and thereby are true and
          correct in all material respects as of such date, and that such Loral
          Entity has complied as of such date in all material respects with all
          of its covenants contemplated hereby and thereby;

     (e)  the exchange by LSC of the LSC Note according to the terms set forth
          on Schedule III hereto; and

     (f)  All necessary consents of any person (including without limitation
          consents from government bodies and authorities) that are required in
          connection with the Exchange Offer, Consent Solicitation and the
          transactions contemplated thereby have been obtained.

     6. Restriction on Transfer. Except pursuant to the terms of this Agreement,
each of the Consenting Holders hereby agrees for itself that, so long as this
Agreement shall remain in effect with respect to such Consenting Holder, such
Consenting Holder shall not (i) grant any proxies to any person in connection
with the Owned Existing Notes to vote on the Exchange Offer or Consent
Solicitation, or (ii) sell, transfer or assign any of the Existing Notes or any
option thereon or any right or interest (voting or otherwise) therein, unless
the grantee or transferee, as the case may be, agrees in writing to be bound by
all the terms of this Agreement by executing a counterpart signature page of
this Agreement and the transferor promptly provides the Parties with a copy
thereof, in which event the Company, Loral Ltd. and LSC shall be deemed to have
acknowledged that their obligations to such Consenting Holder hereunder shall be
deemed to constitute obligations in favor of such grantee or transferee.

     7. Acknowledgment. This Agreement is not and shall not be deemed to be a
solicitation for consents to the Exchange Offer or Consent Solicitation. The
acceptances of the Consenting Holders will not be solicited until the they have
received the Solicitation Materials.

     8. Termination of Agreement by a Consenting Holder. A Consenting Holder may
terminate its obligations hereunder, which obligations shall upon termination be
of no further force and effect, in the event that the Solicitation Materials
shall have been amended or modified and such amendment or modification shall
constitute, or result in, a modification or amendment of the Solicitation
Materials such that, after giving effect to such modification or amendment, the
Solicitation Materials contain terms that are different from those provided in
this Agreement (including the Schedules attached hereto) and which in the
judgment of the

                                       4

<PAGE>

Consenting Holder, materially and adversely affects the treatment or the rights
of such Consenting Holder.

     9. Termination of Agreement by Any Party. Any Party may terminate its
obligations hereunder, which obligations shall upon termination be of no further
force and effect, in the event that:

     (a)  the Exchange Offer and Consent Solicitation are not consummated on or
          prior to December 31, 2001;

     (b)  there shall have occurred and be continuing an event which has a
          material adverse effect on the business, assets, operations, property
          or condition (financial or otherwise) of the Company or Loral Ltd.; or

     (c)  there shall exist or be threatened any action, proceeding, claim or
          counterclaim by any government or governmental, regulatory or
          administrative agency or authority or tribunal or any other person,
          domestic or foreign (other than any action, proceeding, claim or
          counterclaim by the Party seeking to terminate its obligations
          hereunder), before any court, authority, agency or tribunal that
          challenges the Exchange Offer or Consent Solicitation and related
          transactions contemplated hereby which, if decided adversely to the
          Company or any other Party, would likely prohibit, prevent, restrict,
          limit or delay consummation of the Exchange Offer, Consent
          Solicitation or such related transactions.

     10. Representations and Warranties. The Company, Loral Ltd., LSC and each
of the Consenting Holders represents and warrants to each other the following
statements as applicable to it, are true, correct and complete as of the date
hereof:

     (a)  Corporate Power and Authority. Each Party hereto is a corporation,
          partnership, or limited liability company duly organized, validly
          existing and in good standing under the laws of its respective state
          of organization. Each Party hereto has all requisite corporate,
          partnership, or limited liability company, as applicable, power and
          authority to execute and deliver this Agreement.

     (b)  Authorization. The execution and delivery of this Agreement and the
          performance of its obligations hereunder have been duly and validly
          authorized by all necessary corporate, partnership or LLC action on
          its part, and no other proceedings on the part of such Party are
          necessary to authorize this Agreement or to consummate the
          transactions contemplated hereby.

                                       5

<PAGE>

     (c)  Binding Obligation. This Agreement is the legally valid and binding
          obligation of it, enforceable against it in accordance with its terms.

     (d)  No Conflicts. The execution, delivery and performance by it of this
          Agreement do not and shall not (i) violate any provision of law, rule
          or regulation applicable to it or any of its subsidiaries or its
          certificate of incorporation or bylaws or other organizational
          documents or those of any of its subsidiaries or (ii) conflict with,
          result in a breach of or constitute (with due notice or lapse of time
          or both) a default under any material contractual obligation to which
          it or any of its subsidiaries is a party.

     (e)  Governmental Consents. The execution, delivery and performance by it
          of this Agreement does not and shall not require any registration or
          filing with, consent or approval of, or notice to, or other action to,
          with or by, any federal, state or other governmental authority or
          regulatory body, other than the Securities and Exchange Commission.

     (f)  Holdings. Each Consenting Holder represents and warrants that, as of
          the date hereof, (i) such Consenting Holder either (A) is the
          beneficial owner of the principal amount of Existing Notes set forth
          below under its signature, or (B) has investment and voting discretion
          with respect to the principal amount of Existing Notes set forth below
          under its signature and has the power and authority to bind the
          beneficial owner of such Existing Notes to the terms of this Agreement
          (in either case, the "Owned Existing Notes"), (ii) such Consenting
          Holder has full power and authority to vote and consent to matters
          concerning the Owned Existing Notes and to exchange, assign and
          transfer the Owned Existing Notes.

     (g)  Qualified Institutional Buyer. Each Consenting Holder represents and
          warrants that it is a "qualified institutional buyer" within the
          meaning of Rule 144A under the Securities Act of 1933, as amended.

     11. Effectiveness. This Agreement shall be effective and binding upon the
execution and delivery, in accordance with Paragraph 17, of this agreement by
each of the Company, Loral Ltd., LSC, and Consenting Holders holding at least
49% of the aggregate outstanding principal amount of the Existing Notes.

     12. Further Acquisition of Securities. This Agreement shall in no way be
construed to preclude any Party from acquiring additional Existing Notes.
However, any such

                                       6

<PAGE>

additional Existing Notes so acquired shall automatically be deemed to be
Existing Notes and to be subject to the terms of this Agreement.

     13. Amendments. This Agreement may not be modified, amended or supplemented
without the prior written consent of all of the Parties.

     14. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to any
conflicts of law provision which would require the application of the law of any
other jurisdiction.

     15. Expenses. The Company will pay (i) the fees and expenses (including the
reasonable fees and expenses of counsel) of Loral Ltd. in connection with the
negotiation, execution and delivery of this Agreement and the Exchange Offer,
(ii) the fees and expenses of Wachtell, Lipton, Rosen & Katz, counsel to the
Consenting Holders, in accordance with the terms of that certain letter
agreement between the Company and Wachtell, Lipton, Rosen & Katz dated as of the
date hereof, (iii) its own expenses, including investment banking, financial
advisory, printing, legal, accounting, solicitation agent, information agent
fees and expenses, (iv) expenses incurred to obtain a rating of the New Notes,
and (v) the fees and expenses of the indenture trustee for the New Notes;
provided that the maximum amount payable by the Company in accordance herewith
will not exceed $5,000,000.

     16. Confidentiality. The Consenting Holders agree to be bound by the
provisions of Schedule IV attached hereto, which terms are incorporated herein
by reference.

     17. Notices. All demands, notices, requests, consents, and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered by courier service, messenger, or telecopy at, or if duly
deposited in the mails, by certified or registered mail, postage prepaid, return
receipt requested, to the following addresses, or such other addresses as may be
furnished hereafter by notice in writing, to the following Parties:

     if to the Company, to:

          Loral Cyberstar, Inc.
          c/o Loral SpaceCom Corporation
          600 Third Avenue
          New York, NY 10016
          Attention: Avi Katz
          Fax:  (212) 338-5320

          With a copy to:

          Willkie Farr & Gallagher
          787 Seventh Avenue
          New York, New York 10019
          Attention: William E. Hiller, Esq.

                                       7

<PAGE>

          Fax:  212 728-8111

     If to Loral Space & Communications Ltd., to:

          Loral Space & Communications, Ltd.
          c/o Loral SpaceCom Corporation
          600 Third Avenue
          New York, NY 10016
          Attention: Avi Katz
          Fax:  (212) 338-5320

     If to Loral SpaceCom Corporation, to:

          Loral SpaceCom Corporation
          600 Third Avenue
          New York, NY 10016
          Attention: Avi Katz
          Fax:  (212) 338-5320

     if to any Consenting Holder, to such Consenting Holder at the address shown
     on the applicable signature page hereto, to the attention of the person who
     has signed this Agreement on behalf of such holder, with a copy to:

          Wachtell, Lipton, Rosen & Katz
          51 W.  52nd Street
          New York, New York 10019-6150
          Attention: Chaim J. Fortgang, Esq.
          cjfortgang@wlrk.com
          Fax:  (212) 403-2000

     18. Further Assurances. Each of the Parties agrees to execute and deliver,
or to cause to be executed and delivered, all such instruments, and to take all
such action as the other Parties may reasonably request in order to effectuate
the intent and purposes of, and to carry out the terms of, this Agreement.

     19. Headings. The headings of the sections, paragraphs and subsections of
this Agreement are inserted for convenience only and shall not affect the
interpretation hereof.

     20. Successors and Assigns. This Agreement is intended to bind and inure to
the benefit of the Parties and their respective successors, assigns, heirs,
executors, administrators and representatives.

     21. Entire Agreement. This Agreement constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all other
prior agreements and

                                       8

<PAGE>

understandings, both written and oral, between the Parties with respect to the
subject matter hereof.

     22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same Agreement.

     23. No Third-Party Beneficiaries. Unless expressly stated herein, this
Agreement shall be solely for the benefit of the Parties hereto and no other
person or entity shall be a third-party beneficiary hereof.

                                       9

<PAGE>

     IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to
be executed and delivered by its duly authorized officer as of the date first
above written.

                              LORAL CYBERSTAR, INC.

                              By: /s/ Richard P. Mastoloni
                                  ------------------------------
                                  Name:  Richard P. Mastoloni
                                  Title: Vice President & Assistant Treasurer

                              LORAL SPACE & COMMUNICATIONS LTD.

                              By: /s/ Richard P. Mastoloni
                                  ------------------------------
                                  Name:  Richard P. Mastoloni
                                  Title: Vice President & Assistant Treasurer

                              LORAL SPACECOM CORPORATION

                              By: /s/ Richard P. Mastoloni
                                  ------------------------------
                                  Name:  Richard P. Mastoloni
                                  Title: Vice President & Assistant Treasurer

                                       10

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              AIG GLOBAL INVESTMENT CORP.
                              As Investment Manager for Certain Funds &
                              Accounts it Manages

                              By: /s/ Kaye Handley
                                  ------------------------------

                                  Name:  Kaye Handley

                                  Title: Managing Director

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              AMERICAN HIGH-INCOME TRUST:

                              By: /s/ Michael J. Downer
                                  ------------------------
                                  Name:  Michael J. Downer

                                  Title: Secretary, Capital Research and
                                         Management Company, Holder's
                                         investment adviser

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                           Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              THE BOND FUND OF AMERICA, INC.:

                              By: /s/ Michael J. Downer
                                  ------------------------------

                                  Name:  Michael J. Downer

                                  Title: Secretary, Capital Research and
                                         Management Company, Holder's
                                         investment adviser

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                           Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              THE INCOME FUND OF AMERICA, INC.:

                              By: /s/ Michael J. Downer
                                  ------------------------------

                                  Name:  Michael J. Downer

                                  Title: Secretary, Capital Research and
                                         Management Company, Holder's
                                         investment adviser

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              AMERICAN FUNDS INSURANCE SERIES - HIGH YIELD
                              BOND FUND:

                            By: /s/ Michael J. Downer
                                  ------------------------------

                                  Name:  Michael J. Downer

                                  Title: Secretary, Capital Research and
                                         Management Company, Holder's
                                         investment adviser

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                           Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              THE DREYFUS CORPORATION

                              By: /s/ Stephen R. Byers
                                  ------------------------------

                                  Name:  Stephen R. Byers

                                  Title: Vice Chairman and CIO

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                           Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              FEDERATED HIGH INCOME BOND FUND, INC.

                              By: Federated Investment Management Company,
                                  as attorney-in-fact

                              By: /s/ Kathryn P. Heagy
                                  ------------------------------

                              Name:  Kathryn P. Heagy

                              Title: Assistant Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              FEDERATED HIGH YIELD TRUST

                              By: Federated Investment Management Company,
                                  as attorney-in-fact

                              By: /s/ Kathryn P. Heagy
                                  ------------------------------

                              Name:  Kathryn P. Heagy

                              Title: Assistant Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              FEDERATED HIGH INCOME ADVANTAGE FUND

                              By: Federated Investment Counseling,
                                  as attorney-in-fact

                              By: /s/ Kathryn P. Heagy
                                  ------------------------------

                              Name:  Kathryn P. Heagy

                              Title: Assistant Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                           Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              AMERICAN SKANDIA TRUST HIGH YIELD PROTFOLIO

                              By: Federated Investment Counseling,
                                  as attorney-in-fact

                              By: /s/ Kathryn P. Heagy
                                  ------------------------------

                              Name:  Kathryn P. Heagy

                              Title: Assistant Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              FEDERATED HIGH INCOME BOND FUND II OF
                              FEDERATED INSURANCE SERIES

                              By: Federated Investment Management Company,
                                  as attorney-in-fact

                              By: /s/ Kathryn P. Heagy
                                  ------------------------------

                              Name:  Kathryn P. Heagy

                              Title: Assistant Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              VARIABLE INVESTORS SERIES TRUST HIGH
                              INCOME PORTFOLIO

                              By: Federated Investment Counseling,
                                  as attorney-in-fact

                              By: /s/ Kathryn P. Heagy
                                  ------------------------------

                              Name:  Kathryn P. Heagy

                              Title: Assistant Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                           Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              TRAVELERS SERIES TRUST FEDERATED HIGH
                              YIELD PORTFOLIO

                              By: Federated Investment Counseling,
                                  as attorney-in-fact

                              By: /s/ Kathryn P. Heagy
                                  ------------------------------

                              Name:  Kathryn P. Heagy

                              Title: Assistant Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              AMERICAN SKANDIA ADVISORY FUNDS, INC.
                              FEDERATED HIGH YIELD BOND FUND

                              By: Federated Investment Counseling,
                                  as attorney-in-fact

                              By: /s/ Kathryn P. Heagy
                                  ------------------------------

                              Name:  Kathryn P. Heagy

                              Title: Assistant Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              NATIONWIDE SEPARATE ACCOUNT TRUST HIGH
                              INCOME BOND FUND

                              By: Federated Investment Counseling,
                                  as attorney-in-fact

                              By: /s/ Kathryn P. Heagy
                                  ------------------------------

                              Name:  Kathryn P. Heagy

                              Title: Assistant Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                           Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              HIGH YIELD BOND PORTFOLIO OF FEDERATED CORE TRUST

                              By: Federated Investment Management Company,
                                  as attorney-in-fact

                              By: /s/ Kathryn P. Heagy
                                  ------------------------------

                              Name:  Kathryn P. Heagy

                              Title: Assistant Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              OHIO NATIONAL FUND, INC.
                              HIGH INCOME BOND PORTFOLIO

                              By: Federated Investment Counseling,
                                  as attorney-in-fact

                              By: /s/ Kathryn P. Heagy
                                  ------------------------------

                              Name:  Kathryn P. Heagy

                              Title: Assistant Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              FEDERATED CBO, LIMITED

                              By: Federated Investment Counseling,
                                  as attorney-in-fact

                              By: /s/ Kathryn P. Heagy
                                  ------------------------------

                              Name:  Kathryn P. Heagy

                              Title: Assistant Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                           Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              FEDERATED CBO II

                              By: Federated Investment Counseling,
                                  as attorney-in-fact

                              By: /s/ Kathryn P. Heagy
                                  ------------------------------

                              Name:  Kathryn P. Heagy

                              Title: Assistant Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              SUNAMERICA SERIES TRUST CORPORATE BOND PORTFOLIO
                              HIGH YIELD SUBPORTFOLIO

                              By: Federated Investment Counseling,
                                  as attorney-in-fact

                              By: /s/ Kathryn P. Heagy
                                  ------------------------------

                              Name:  Kathryn P. Heagy

                              Title: Assistant Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                           Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              FIRST INVESTORS MANAGEMENT CO.

                              By: /s/ Nancy W. Jones
                                  ------------------------------
                                  Name:  Nancy W. Jones
                                  Title: Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              GOLDEN TREE ASSET MANAGEMENT

                              By: /s/ Steven A. Tananbaum of Golden Tree
                                  --------------------------------------
                                  Name:  Steven A. Tananbaum
                                  Title: President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              ML CBO IV (CAYMAN) LTD.

                              By: Highland Capital Management, L.P.
                                  as Collateral Manager

                              By: /s/ Mark K. Okada, CFA
                                  ------------------------------

                                  Name:  Mark K. Okada, CFA

                                  Title: Executive Vice President, Highland
                                         Capital Management, L.P.

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              PAMCO CAYMAR LTD.
                              By: Highland Capital Management, L.P.
                                  as Collateral Manager

                              By: /s/ Mark K. Okada, CFA
                                  ------------------------------

                                  Name:  Mark K. Okada, CFA

                                  Title: Executive Vice President, Highland
                                         Capital Management, L.P.

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              PAM CAPITAL FUNDING, L.P.
                              By: Highland Capital Management, L.P.
                                  as Collateral Manager

                              By: /s/ Mark K. Okada, CFA
                                  ------------------------------

                                  Name:  Mark K. Okada, CFA

                                  Title: Executive Vice President, Highland
                                         Capital Management, L.P.

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              CONTINENTAL ASSURANCE COMPANY
                              SEPARATE ACCOUNT (E)
                              By: Highland Capital Management, L.P.
                                  as Attorney-in-Fact

                              By: /s/ Todd Travers
                                  ------------------------------

                                  Name:  Todd Travers

                                  Title: Senior Portfolio Manager, Highland
                                         Capital Management, L.P.

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              PROSPECT STREET HIGH INCOME PORTFOLIO, INC.

                              By: /s/ R. Joseph Dougherty
                                  ------------------------------

                                  Name:  R. Joseph Dougherty

                                  Title: Senior Vice President, Secretary

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              LUTHERAN BROTHERHOOD HIGH YIELD FUND*
                              LB SERIES FUND, INC. - HIGH YIELD PORTFOLIO**

                              By: /s/ James M. Walline
                                  ------------------------------

                                  Name:  James M. Walline

                                  Title: Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                              *    By Lutheran Brotherhood Research Corp., its
                                   Investment Adviser

                              **   By Lutheran Brotherhood, its Investment
                                   Adviser

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              MW POST ADVISORY GROUP, LLC
                              AS MANAGER OF ITS INVESTMENT ACCOUNTS

                              By: /s/ Carl Goldsmith
                                  ------------------------------

                                  Name:  Carl Goldsmith

                                  Title: Manager Director

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              MACKAY SHIELDS LLC ON
                              BEHALF OF FUNDS LT MANAGES

                              By: /s/ Donald F. Morgan
                                  ------------------------------

                                  Name:  Donald F. Morgan

                                  Title: Managing Director

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              GCBS: US HIGH YIELD FUND

                              By: /s/ Robert F. Murray
                                  ------------------------------

                                  Name:  Robert Murray

                                  Title: Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              ML BOND FUND INC., HIGH INCOME PORTFOLIO

                              By: /s/ Aldona Schwartz
                                  ------------------------------

                                  Name:  Aldona Schwartz

                                  Title: Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              MASTER US HIGH YIELD TRUST

                              By: /s/ Aldona Schwartz
                                  ------------------------------

                                  Name:  Aldona Schwartz

                                  Title: Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              CORPORATE HIGH YIELD FUND III, INC.

                              By: /s/ Elizabeth M. Phillips
                                  ------------------------------

                                  Name:  Elizabeth Phillips

                                  Title: Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              CORPORATE HIGH YIELD FUND II, INC.

                              By: /s/ Elizabeth M. Phillips
                                  ------------------------------

                                  Name:  Elizabeth Phillips

                                  Title: Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              CORPORATE HIGH YIELD FUND, INC.

                              By: /s/ Elizabeth M. Phillips
                                  ------------------------------

                                  Name:  Elizabeth Phillips

                                  Title: Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              PACIFIC INVESTMENT MANAGEMENT COMPANY, LLC

                              By: /s/ Raymond Kennedy
                                  ------------------------------

                                  Name:  Raymond Kennedy

                                  Title: Executive Vice President

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              SUN AMERICA ASSET MANAGEMENT

                              By: /s/ John W. Risner
                                  ------------------------------

                                  Name:  John W. Risner

                                  Title: Senior Vice President -
                                         Senior Portfolio Management

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              DRESDNER KLEINWORT WASSERSTEIN -
                              GRANTCHESTER, INC.

                              By: /s/ Ashish Bhutani
                                  ------------------------------

                                  Name:  Ashish Bhutani

                                  Title: CEO, North America

                              Principal Amount of:

                                   Senior Notes:  $

                                   Senior Discount Notes:  $

                          Signature Page To Agreement

<PAGE>

CONSENTING HOLDER             NAME OF CONSENTING HOLDER:

                              LEHMAN BROTHERS, INC.

                              By: /s/John Alexander Kirk
                                  ------------------------------

                                  Name:  John Alexander Kirk

                                  Title: Managing Director

                              Principal Amount of:

                                   Senior Notes:

                                   Senior Discount Notes:

                          Signature Page To Agreement

<PAGE>

                                   SCHEDULE I

                  Principal Terms of the New Notes and Warrants
                  ---------------------------------------------

1.   Definitions. As used herein, the follows terms have the following meaning:

     (a)  "Aggregate Senior Discount Note Amount" as of any date of
          determination means the aggregate accreted value of the Senior
          Discount Notes as of October 15, 2001, computed in accordance with the
          terms thereof, as of such date.

     (b)  "Aggregate Senior Note Amount" as of any date of determination means
          the aggregate unpaid principal amount of the Senior Notes plus accrued
          and unpaid interest thereon as of October 15, 2001, as of such date.

     (c)  "Pro Rata Share" means, as of any date of determination, a share of
          New Notes or Warrants, as the case may be, equal to the ratio
          determined as of the closing date of the Exchange Offer of (x) the
          Tendered Senior Discount Note Amount or Tendered Senior Note Amount,
          as the case may be, divided by (y) the sum of (i) the Tendered Senior
          Note Amount plus (ii) the Tendered Senior Discount Note Amount.

     (d)  "Tendered Senior Discount Note Amount" as of any date of determination
          means the accreted value of the Senior Discount Notes as of October
          15, 2001 validly tendered and not properly withdrawn, computed in
          accordance with the terms thereof.

     (e)  "Tendered Senior Note Amount" as of any date of determination means
          the unpaid principal amount of the Senior Notes validly tendered and
          not properly withdrawn plus accrued and unpaid interest thereon as of
          October 15, 2001.

2.   New Notes.

     (a) Principal amount: Principal amount of New Notes equal to product of (x)
$675,000,000 multiplied by (y) the ratio determined as of the Closing Date of
the Exchange Offer of (i) the sum of the Tendered Senior Discount Note Amount
plus the Tendered Senior Note Amount divided by (ii) the sum of the Aggregate
Senior Discount Note Amount plus the Aggregate Senior Note Amount. Each holder
to receive their Pro Rata Share of the New Notes.

     (b) Maturity: July 15, 2006

                                       S-1

<PAGE>

     (c) Interest Rate: 10% per annum, payable semiannually on January 15 and
July 15 of each year in cash, with the first interest payment due July 15, 2002.
First interest payment to include all interest that would have accrued on New
Notes as if such New Notes had been issued on October 15, 2001 (less any cash
interest paid on the Existing Notes after the date hereof, which amount shall
offset interest paid to each Existing Note holder having received such cash
interest payment).

     (d) Redemption: Optional redemption is permitted (a) at any time upon
payment of a make whole premium (using a discount rate of 0.50% plus the rate on
treasuries with a comparable maturity) and (b) at any time up to $100 million
aggregate principal amount of New Notes solely out of "excess cash flow" at a
redemption price equal to 101% of the principal amount of the New Notes being
redeemed ("Excess Cash Flow Prepayment").

     (e) Covenants: Covenants to include:

          (i) covenants in Existing Notes but, tighter restrictions on the
     incurrence of debt and the granting of liens;

          (ii) covenants must be consistent with any limitations relating to
     refinancing of indebtedness by subsidiaries of Loral Ltd. contained in the
     Loral Ltd. Indenture relating to its 9 1/2% Senior Notes Due 2006;

          (iii) covenants will permit the Company (i) to use its cash flow to
     construct or acquire a replacement satellite and (ii) to incur secured
     indebtedness to construct or acquire a replacement satellite in an amount
     equal to (x) the amount of any Excess Cash Flow Prepayment actually paid
     plus (y) the amount of equity proceeds received by the Company after the
     date of consummation of the Exchange Offer; provided that (1) any such
     secured indebtedness shall be incurred contemporaneously with the
     acquisition of such satellite or within 60 days thereafter (or incurred to
     refinance, renew or replace such indebtedness), (2) such liens secure
     indebtedness in an amount not in excess of the cost of such satellite, and
     (3) such liens do not extend to any property other than the satellite for
     which such indebtedness was incurred. Prior to the acquisition of such
     replacement satellite, the Company shall provide to the Consenting
     Noteholders or their representatives a written opinion from an independent
     party qualified in making such determination that the purchase price of the
     replacement satellite is consistent with then prevailing market prices for
     comparable satellites.

          (iv) any covenant comparable to Section 4.15 of the Indentures will
     change the 15 month period referred to therein to 26 months); and

                                       S-2

<PAGE>

          (v) Covenants to be applicable to the Company and its restricted
     subsidiaries.

     (f) Guarantee: Usual and customary guarantee of payment by Loral Ltd.
Operating and financial covenants in the Guarantee same as provided in the Loral
Ltd. 9 1/2% Senior Notes Due 2006.

     (g) Collateral: None but, except as set forth in Item 2(e)(iii) above, the
covenants will include a negative pledge with exceptions to be negotiated.

     (h) Registration and Trading: New Notes to be publicly traded (but not
listed), and may be traded separately from Warrants. The securities issued in
connection with the Exchange Offer shall be registered under the Securities Act
of 1933.

     (i) Representations and Warranties: Prior to the commencement of the
Exchange Offer, Loral Ltd., Cyberstar and LSC shall each deliver to the
Consenting Holders an officer's certificate containing usual and customary
representations and warranties (subject to usual and customary carve-outs)
including without limitation representations and warranties concerning:
corporate standing, valid existence and authorization of the transactions
contemplated hereby; existence of all necessary corporate power and authority;
all necessary corporate action has been taken; due execution and delivery; the
New Notes and each agreement (including without limitation the guaranty) are
each valid, legally binding and enforceable in accordance with their respective
terms; shares issuable upon exercise of warrants duly authorized and reserved
for issuance, and upon issuance to be validly issued, fully paid and
non-assessable and not subject to any preemptive or similar rights; compliance
with applicable requirements of the federal and state securities laws; no
conflicts with existing agreements; no violation of any law, rule or regulation;
transactional compliance with all applicable foreign, federal, local or state
securities laws, rules and regulations; no consent or authorization required
(other than listed exceptions); no material pending or threatened action (other
than listed exceptions); New Notes and Guaranty when issued will be duly
authorized and when duly executed, will be duly authenticated, issued and
delivered.

     (j) Legal Opinion: The registration statement when it becomes effective
will include the opinions of counsel for Cyberstar, Loral Ltd. and LSC
reasonably acceptable to the Consenting Holders, including without limitation an
opinion that each of the New Notes and the agreements (including without
limitation the guaranty agreement) are legal, valid and enforceable obligations
in accordance with their respective terms, and that there is no conflict between
the terms of such New Notes and agreements and each of the Loral Entities'
charter, bylaws and public and private funded indebtedness.

                                       S-3

<PAGE>

3.   Warrants.

     (a) Warrants: Warrants to be five year warrants to purchase up to 6,657,096
common shares of Loral Ltd. (representing as of June 30, 2001, 2% of Loral
Ltd.'s outstanding common stock) with an exercise price equal to 110% of the
average of the daily volume-weighted average trading prices of the common stock
on the New York Stock Exchange as reported by Bloomberg, L.P. for the ten
consecutive trading days preceding the second trading day prior to the closing
of the Exchange Offer.

     (b) Distribution: Each holder to receive their Pro Rata Share of the
Warrants.

     (c) Terms: Warrant Agreement to contain usual and customary anti-dilution
provisions.

     (d) Registration and Trading: Warrants to be publicly traded, and may be
traded separately from New Notes. The Warrants issued in connection with the
Exchange Offer shall be registered under the Securities Act of 1933.

     (e) Representations and Warranties: Same as with respect to New Notes.

     (f) Legal Opinion: Same as with respect to New Notes.

                                       S-4

<PAGE>

                                   SCHEDULE II

                  Summary of Proposed Amendments to Indentures
                  --------------------------------------------

I.   AMENDMENT TO SENIOR NOTES INDENTURE. SECTIONS 4.02 THROUGH 4.10 AND
     SECTIONS 4.12 THROUGH 4.15, SECTIONS 4.18 AND 4.19, SECTIONS 5.01 AND 5.02
     (EXCEPT THEY SHALL BE RETAINED TO THE EXTENT NECESSARY TO REQUIRE THE
     SUCCESSOR OR TRANSFEREE TO ASSUME THE OBLIGATIONS UNDER THE INDENTURE AND
     THE SENIOR NOTES AND SHALL RELEASE THE PREDECESSOR PERSON), CLAUSES (C),
     (E), (F), (G), (H) AND (J) OF SECTION 6.01 SHALL BE ELIMINATED AND
     CONFORMING CHANGES SHALL BE MADE TO THE OTHER PROVISIONS OF THE INDENTURE.

II.  AMENDMENT TO SENIOR DISCOUNT NOTES INDENTURE. SECTIONS 4.02 THROUGH 4.10
     AND SECTIONS 4.12 THROUGH 4.15, SECTIONS 4.18 AND 4.19, SECTIONS 5.01 AND
     5.02 (EXCEPT THEY SHALL BE RETAINED TO THE EXTENT NECESSARY TO REQUIRE THE
     SUCCESSOR OR TRANSFEREE TO ASSUME THE OBLIGATIONS UNDER THE INDENTURE AND
     THE SENIOR DISCOUNT NOTES AND SHALL RELEASE THE PREDECESSOR PERSON),
     CLAUSES (C), (E), (F), (G), (H) AND (J) OF SECTION 6.01 SHALL BE ELIMINATED
     AND CONFORMING CHANGES SHALL BE MADE TO THE OTHER PROVISIONS OF THE
     INDENTURE.

III. EFFECTIVENESS OF AMENDMENTS. AMENDMENTS EFFECTIVE ONLY UPON RECEIPT BY THE
     INDENTURE TRUSTEE OF REQUISITE CONSENTS AND CONSUMMATION BY THE COMPANY OF
     THE EXCHANGE OFFER.

                                       S-5

<PAGE>

                                  SCHEDULE III

Summary of Terms of Consideration to be given in Exchange for Cyberstar/LSC Note
--------------------------------------------------------------------------------

     THE COMPANY WILL PAY IN CASH ALL ACCRUED INTEREST ON THE CYBERSTAR/LSC NOTE
THROUGH THE DATE OF CONSUMMATION OF THE EXCHANGE OFFER.

     THE COMPANY WILL TRANSFER TO LSC OR ITS DESIGNEE ALL ASSETS OWNED BY THE
COMPANY OR ANY OF ITS SUBSIDIARIES COMPRISING THE "DATA BUSINESS".

     THE COMPANY WILL ISSUE TO LSC NEW SUBORDINATED NOTES (THE "SUBORDINATED
NOTES") AS FOLLOWS:

          PRINCIPAL AMOUNT: AN AMOUNT EQUAL TO THE THEN OUTSTANDING PRINCIPAL
               AMOUNT OF THE CYBERSTAR/LSC NOTE LESS $50,000,000 (WHICH
               PRINCIPAL AMOUNT WILL BE APPROXIMATELY $29,700,000).

          MATURITY: JULY 30, 2006.

          INTEREST RATE: 10% PER ANNUM, PAYABLE SEMIANNUALLY ON JANUARY 30 AND
               JULY 30 OF EACH YEAR, IN KIND, THROUGH MATURITY.

          COVENANTS: TO BE DETERMINED BUT SUBSTANTIALLY SIMILAR TO THOSE OF THE
               NEW NOTES.

          SUBORDINATION: SUBORDINATED TO THE NEW NOTES ON USUAL AND CUSTOMARY
               TERMS.

          COLLATERAL: NONE.

          GUARANTEE: USUAL AND CUSTOMARY GUARANTEE OF PAYMENT BY LORAL LTD.
               OPERATING AND FINANCIAL COVENANTS IN THE GUARANTEE SAME AS
               PROVIDED IN THE LORAL LTD. 9 1/2% SENIOR NOTES DUE 2006. THE
               GUARANTEE WILL BE SUBORDINATED TO THE GUARANTEE OF LORAL LTD. OF
               THE NEW NOTES.

                                       S-6

<PAGE>

                                   SCHEDULE IV

                           Confidentiality Provisions
                           --------------------------

     All financial and other information regarding Loral Ltd., the Company and
its affiliates (whether written or oral) furnished to any Holder ("you") and
your Representatives (as defined below), whether prior to, on or following the
date hereof, together with analyses, compilations, forecasts, studies or other
documents or records prepared by you or your Representatives which contain, are
based on or otherwise reflect or are generated in whole or in part from such
information, including that stores on any computer, word processor or other
similar device, are collectively referred to herein as the "Evaluation
Material."

     You hereby agree as follows:

(1)  You shall use the Evaluation Material solely for the purpose of evaluating
     the Exchange Offer and you shall keep the Evaluation Material confidential,
     except that you may disclose the Evaluation Material or portions thereof to
     those of your and your funds' directors, officers, employees, affiliates,
     representatives (including, without limitation, financial advisors,
     attorneys and accountants) (collectively, the "Representatives") (a) who
     need to know such information for the purpose of evaluating the Exchange
     Offer, (b) who are informed by you of the confidential nature of the
     Evaluation Material and (c) who agree to be bound by the terms of this
     Agreement as if they were parties hereto. You shall be responsible for any
     breach of this Agreement by your Representatives. In the event that you or
     any of your representatives are requested or required (by deposition,
     interrogatory, request for documents, subpoena, civil investigative demand
     or similar process) to disclose any of the Evaluation Material, you shall
     provide Loral Ltd. and the Company with prompt prior written notice of such
     requirement, you shall furnish only that portion of the Evaluation Material
     which you are advised by counsel is legally required, and you shall
     exercise your reasonable best efforts to obtain reliable assurance that
     confidential treatment will be accorded such Evaluation Material.

(2)  If you do not, in accordance with this Agreement, proceed with the Exchange
     Offer or upon termination of this Agreement, you will promptly inform Loral
     Ltd. and the Company of that decision and, in that case or at any time upon
     the request of the Company or Loral Ltd., you and your Representatives
     shall promptly either return to the Company and Loral Ltd., as appropriate,
     or destroy all copies of the written Evaluation Material in your or their
     possession or under your or their custody or control (including that stored
     in any computer, word processor or similar device) and confirm such
     destruction to the Company and Loral Ltd. in writing. Notwithstanding
     anything to the contrary contained in this Agreement, if you are not
     required, in accordance with this Agreement, to proceed with the Exchange
     Offer or upon termination of this Agreement, you will continue to hold any
     Evaluation Material obtained hereunder confidential and you further agree
     not to use the Evaluation Material for any purpose.

                                       S-7

<PAGE>

(3)  The term "Evaluation Material" does not include any information which (i)
     at the time of disclosure is generally available to and known by the public
     (other than as a result of a disclosure by you or by any of the
     Representatives) or (ii) was available to you or your representatives on a
     non-confidential basis from a source (other than Loral Ltd., the Company or
     their representatives) that is not and was not prohibited from disclosing
     such information to you or your Representatives by a contractual, legal or
     fiduciary obligation.

(4)  You agree that no failure or delay by the Company or Loral Ltd. in
     exercising any right, power or privilege hereunder will operate as a waiver
     thereof, nor will any single or partial exercise thereof preclude any other
     or further exercise thereof or the exercise of any other right, power or
     privilege hereunder.

     The Company and Loral Ltd. hereby agree that the terms of this
confidentiality agreement shall terminate and no longer be of any force and
effect as to the Evaluation Material upon the earlier to occur of (i) the date
set forth in Section 1(b) of the Agreement; or (ii) the release to the public of
information concerning the principal terms of the Financial Restructuring,
whether by press release or commencement of the Exchange Offer or Consent
Solicitation.

                                       S-8

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