Bernard Schwartz: Good morning, ladies and gentlemen. I'm Bernard Schwartz, CEO and Chairman of Loral Space & Communications, and I'd like to welcome you to the 2003 Annual Meeting of Shareholders.

On your seat, you will find an agenda and a set of guidelines governing the conduct of this meeting. Please review and follow these guidelines. After the formal part of the meeting, there'll be ample time for questions and answers.

At this time, I would like to introduce to you the other members of Loral's Board of Directors, and I ask that each one identify yourself as your name is called. Robert Hodes, Gershon Kekst, Charles Lazarus, Sally Minard, Mal Ruderman, Donald Shapiro, Arthur Simon, Daniel Yankelovich and Eric Zahler.

In addition to Eric, we have several other members of the Management Team here today. Our Executive Vice-President and Chief Financial Officer is Richard Townsend, Avi Katz is Chief Counsel, Harvey Rein, who's our Controller, Mr. Jackson, Vice-President Administration, Mr. Mastoloni, who is the Treasurer/Vice-President. And we also have Larry Atlas here from Washington, as well and Jeanette Clonan sitting at the end. We also have with us Joe Maglione and Steve Laughlin from Deloitte & Touche, our independent auditors, and they will be available for any appropriate questions later on.

Beginning on April 21, 2003, a notice of this meeting, the proxy statement and proxy card were distributed to every owner of common stock as of the April 1, 2003 record date. Copies of these, together with the affidavit of mailing, are present and will be filed with the corporate records. In addition and accordance with Bermuda law, I present the Financial Statement to the Company for the fiscal year ended December 31, 2002, and the report of the Company's auditors Deloitte & Touche. The Bank of New York is the Transfer Agent for the Company, and Stacy Beech of the bank is acting as the Inspector of Elections for this meeting. Representatives of the Bank of New York have prepared a certified list of shareholders as of the record date, and this list is available for inspection upon request.

The Inspector of Election has advised me that a majority of the Company's shares outstanding and entitled to vote at this meeting, are present and are represented by proxy and I declare, therefore that a quorum is present. In addition, pursuant to Bermuda law and the Company's bye-laws, I request that all matters to come before the meeting be decided by a poll. This means that each shareholder present, in person or by proxy, will have one vote for each share held.

There are four proposals to be voted on this morning. One is the re-election of Mr. Gittis, Mr. Kekst and Mr. Simon and Mr. Zahler as Class One Directors. Number two is amending the Company's by-laws to allow the implementation of the reverse split of Company's common stock. Number three is to increase the number of authorized shares of common stock of the Company. And four, the ratification and selection of Deloitte & Touche as the Company's independent auditors for the 2003 Fiscal Year.

The Inspector of Election has informed that, as a result of voting of proxy, Proposals One, Three and Four have received approval from a majority of the shares voted, and Proposal Two has received approval from a majority of the common shares outstanding. If there are any shareholders who have not yet voted on these proposals and who wish to do so, they may do so now and if so, please raise your hand to identify you. The polls are now closed and Ms. Beech will please inform me when you are ready to submit your report.

Stacy Beech (Inspector of Election - Bank of New York): With reference to the Election of Directors, I report that of the four Class One nominees, no person received fewer than 94-percent of the votes cast at the meeting. Regarding the proposal to amend the Company's bye-laws to allow for the implementation of a reverse split of the Company's common stock, I report that 77-percent of the Company's outstanding shares of common stock voted in favor of adopting this proposal. Regarding the proposal to increase the number of authorized shares of common stock of the Company, I report that 87-percent of the votes cast at the meeting have been case in favor of adopting this proposal. Regarding the resolution ratifying of the election of independent auditors, I report that 96-percent of the votes cast at the meeting have been cast in favor of adopting this resolution.

Bernard Schwartz: Thank you. The four proposals presented at the meeting have received sufficient affirmative votes and accordingly are adopted. There is no other business to properly come before the meeting, and therefore, the business portion of the shareholder meeting is now adjourned.

I would now like to share with you some observations after which we will have ample time for Q&A. The year that has passed since our last annual meeting has been a difficult one for the satellite industry. Although all segments of the industry have suffered, the manufacturing sector has been the most severely hit.

For Loral, it is no consolation that others are in the same boat as we. The stagnant economy combined with the build-up of capacity has virtually brought to a standstill the growth that was so widely anticipated by everyone in the industry and by all of our customers just a short while ago.

In addition, raising equity and debt has been sharply curtailed as the capital markets declined. Thus, initial public offerings in the industry have been delayed, planned telecommunications applications have been postponed and the development of new technologies - which would have required satellite capacity and services -- has been shifted to the back burner. Capital spending has been cut back dramatically. Expenditures for advertising, product introductions and new programming have dwindled, adversely affecting potential customers for our satellites.

In the face of this contracting business environment, Loral maintained its technology leadership and focused on customer requirements. From a manufacturing perspective, our strong backlog helped tide us over during the protracted order drought.

Similarly, our fixed satellite services backlog is a healthy $1.4 billion - more than three times current annual FSS revenue. Although the expectation for fixed satellite services growth was not achieved last year, the FSS segment did produce EBITDA of $219 million and significant cash flow -- its strong business fundamentals overcoming weak external economic conditions.

No one questions that satellites are a critical part of the global communications infrastructure and always will be. Loral is an established leader in this market, with a sound heritage, a reputation for product reliability and proven innovative technology. We therefore have the strong conviction that success is a matter of timing.

In response to the adverse business circumstances, the company has taken certain aggressive steps, including:

• We reshaped the size of our operations to fit revenue. Our workforce will have been reduced by one-third, from three years ago, to a planned 2,500 at year end 2003.
• Overhead costs over the same period will decline by 39 percent.
• We reduced our inventory of launch vehicles.
• In March of this year, we agreed with our bankers to amend the terms and conditions of our two bank credit facilities.
• We reduced, per our plan, debt and preferred obligations by $1.3 billion over the last 24 months.
• And, we retained professional expertise to continue our examination of strategic alternatives as the industry adjusts to the business downturn.

Now, I'd like to turn now to a short discussion of our two core businesses.

The FSS business remains a compelling business model with strong cash flows and a solid backlog of business.

We have a blue-chip customer base and lead the video broadcast market with customers such as ABC, CBS and FOX. We also have a strong presence in the direct-to-home, cable, and data transport markets.

Our hybrid terrestrial/satellite products and services differentiate us from the competition. We recently introduced a service that provides customers with secure private networks and high-speed two-way Internet access using Skynet's established on-ground and on-orbit global infrastructure.

Despite the generally negative environment, we've identified new opportunities and our position of readiness seems to be well timed for the market. Those opportunities include:

• High-definition TV which uses six to seven times more bandwidth than regular digital transmissions
• Broadband applications such as those targeted by EchoStar and WildBlue
• For rural applications -demand is growing for high speed digital, broadband connections in rural regions around the world - including the United States - not covered by fiber
• And a wide range of government, homeland security and military requirements

Three satellites are scheduled to be added to the Loral fleet before the end of this year, depending on the launch manifest - that is, depending on the availability of launch vehicles. These are:

• Telstar 13, which will increase our presence in the cable arc. This is a shared satellite with EchoStar and is a cost-efficient way to extend our North American capacity.
• Telstar 18, shared with APSTAR, which will increase capacity in Asia, a high growth market -- and provides Loral with the opportunity to expand, using an extremely favorable investment structure.
• And, Estrela do Sul, which will serve Brazil, another high growth market, and the rest the Americas. Our anchor tenant on this satellite is the Boeing Company - which will offer its in-flight Internet service called Connexion.

These additions, already substantially funded, will increase transponder capacity by 32 percent. We believe that these additions to our FSS fleet will bring significant incremental value far in excess of the capital outlays for these satellites. In addition to improving the robustness of our fleet, they produce revenue and EBITDA almost immediately after launch.

Loral's FSS revenue in 2002 was $395 million and EBITDA was $219 million.

Demand for FSS services varies geographically. It remains strong in Asia and in the Middle East. We experienced a war-related spike in occasional use that continued into April and is tapering off now. Latin America seems to be showing some signs of recovery, and North America Ku-band is steady with some increasing interest.

Capacity utilization across the fleet was 58 percent at the end of the quarter - we're not expecting any further utilization decline on our existing fleet this year.

The contract renewal rate remained constant at about 80 percent. And, the average transponder lease rate, annualized - across the fleet - at $1.5 million, hasn't changed since the end of 2002. New business is running closer to $1.4 million per transponder per year. It appears, therefore, that our FSS business -- off slightly -- has stabilized like others in the industry.

With respect to Space Systems/Loral, revenues were $853 million in 2002 and will be somewhat less this year, funded from a large backlog. Our current manufacturing backlog totals $641 million. There are 12 satellites in the factory now - we plan on shipping seven of them this year.

SS/L has not received any orders this year - only four orders have been placed worldwide, across the industry. The length and depth of this order drought is unprecedented in the industry. SS/L has outstanding bids on seven satellite orders, several of them follow-ons for current customers. It is hard to predict the timing or the outcome of these awards but, with orders shifting into the second half of the year, SS/L profitability for the year will be impaired.

With the help of new financial and strategic partners, our customer ordered the restart of construction on the Wild Blue satellite - which addresses the broadband data market. This is an indication that the broadband market is re-awakening the interest of the investment and business community. Revenue from this restarted order will be equivalent to two-thirds of a new satellite order.

Overall, Loral's 2002 revenue of $1.1 billion was up slightly over 2001. EBITDA was $105 million. It would have been $206 million - in line with company guidance - absent certain non-cash charges taken, in 2002, all of which have been previously reported.

Loral ended 2002 with $135 million in cash and available credit - better than expected. At the end of the most recent quarter we had $103 million in cash on hand.

As reported at the end of the first quarter, this year's revenues and EBITDA are expected to be down from last year but in line with our guidance. We remain optimistic that satellite orders will resume in the second half of the year. We expect FSS results to be flat or down somewhat from last year. For Loral overall, we expect revenues to be down slightly from last year and for EBITDA to improve modestly over last year.

We wish to thank our shareholders for passing the proposals with respect to the reverse stock split and increase in the authorized shares. We believe our listing on the New York Stock Exchange is a valuable resource for the shareholders and for the company. The reverse split allows us to restore our compliance with all of the Exchange's criteria for membership.

One final comment before we get to questions: I am exceedingly proud to be associated with the employees of Loral. They work like they own the company - as they should --almost all of them are shareholders, like those of us in this room. In a tough industry and economic environment they've remained spirited, creative, focused and optimistic and we should all thank them for that. And now, I'd like to address whatever questions you might have.

Question and Answer Session:

Question: What will the reverse split ratio be?

Bernard Schwartz: The question is about the reverse stock split and what ratio we've decided on. We have not decided on a ratio. You've given us the opportunity of a range. We will not make that determination for about seven days or so. We wish to consult with our advisors and our consultants as to what the most appropriate ratio will be and we'll let you know that within a weeks' time.

Question: The possibility exists, it's very high that Loral stock is going to reverse split 10-to-1, possibly 20-to-1 - if that happens how do you plan to make it up to your loyal shareholders that put their trust into you for the past seven to eight years? Many of them are retired that had to return back to work. Many of them couldn't retire because they watched their 401Ks and their personal accounts get decimated. I mean, you're going to need possibly $130 minimum per share cost - $230 per share minimum just to break even. How do you feel about that?

Bernard Schwartz: I feel badly about that and I feel very strongly and I'm involved in that question very seriously. The decline in value in Loral stock has been significant and has affected us all very, very deeply and the reasons why your board and your people working here, are working very hard, is focusing completely on shareholder value and you should understand that. The stock split is only a minor remedy, a tool to continue to place Loral in a position to have stockholder value resume, but stockholder value will not resume until the economic environment changes to our benefit.

Question: What's the chances of it going to $130 a share, $260 a share?

Bernard Schwartz: One of our directors describes the situation in this industry as "The Perfect Storm." Up to perhaps, less then two years ago, everyone within the telecommunications industry and outside it listed the satellite industry as one of the big growth industries. Everybody within the industry miscalculated the winds with the sea and built their capacity up, everybody did. Our build-up was driven by our customers, like ABC and CBS and Fox, who misread their marketplace. And it was not just Loral that was caught in that optimism, it was other satellite manufacturers, satellite capacity providers, launch providers and everybody who serves the industry, we all got caught in this perfect storm that changed.

The wind change was very precipitous and left us with overcapacity and then what made it the perfect storm, was that we hit an economic environment over which we had no control and no influence and for all the reasons that you've been reading about for the last two years, in terms of why the market is weak and why business is weak and why there may be a structural change in the economy of the world that hit at the same time. So, the satellite industry suffered an over capacity problem and an economic wind change, in general circumstance that affected the ability of our customers and potential customers to raise new money in the marketplace and many of the customers we had are out of business today because they couldn't raise sufficient resources. We are all in the same boat.

That does not answer your question, but we all do believe that satellites are a recoverable industry. It's not like buggies and horsewhips, this industry survives because there's an absolute need; the whole telecommunications industry depends on satellite communication. So, we do believe there's going to be a recovery and we made the same bet that you made seven years ago. We thought this was an industry whose time was going to be there and would be a very valuable addition to our business. We were wrong with respect to the timing over the last two years.

Loral's business plan, our structure today, is to buy enough time so that we can survive as a viable organization with very critical assets and human resources that cannot be reproduced. We will hold on these because if we lose them, they're lost forever. Our manufacturing capability and infrastructure, all of those things we're holding on to in the firm, solid expectation that there will be an economic change that will allow a resumption of growth in the industry. When that happens, we will recover as well.

When that will happen I do not know. The timing is as elusive to me as to anybody else who does not have a crystal ball, but we're working the problem on the basis of remaining viable, keeping a good product in front of our customers, keeping our customers in a healthy position so that when the recovery comes, we will all enjoy it. When that will happen, how that will reflect in the stock price; if I knew that, I wouldn't have to be here this morning. I'd be somewhere else. So, we sympathize, but I understand that doesn't help you.

If there is something else we could do, we would do it. We're looking at every available option. We're looking at every alternative. We re-examine on a continuous basis, the opportunities and the difficulties in front of us and we hope that we are managing the Company in a way that when the economic upturn occurs, we will be positioned to take advantage of that in stockholder value. I hope that's a satisfactory answer, because I don't know what else to say about that situation.

Question: Well, I appreciate your honesty. Thank you.

Bernard Schwartz: Thank you. Yes, sir.

Question: I have two questions. I own 200,000 shares of Loral, which cost me considerably more than 10 times what it's selling for now. Number one; is there any chance that Loral will get some government business or is the problem caused by what happen in China, something that's insuperable?

That's one, and number two, you, yourself, have made statements in the past about the fact that the number of people in the industry will have to shrink over time. Is there a chance in the near future that someone will either combine with or buy Loral or is the economic situation such that it's not an attractive company at any price?

Bernard Schwartz: With respect to the first question, there is no negative residue in this country, government circles or elsewhere, with respect to the China situation. Most people in government who were around at that time think that Loral got a bum deal because of the decisions that were made with respect to Loral and China. There are two - one was on the satellite and one was with our government regulation, which were made at political levels way above our salary grade and having nothing to do with us.

The fact that we cannot ship a completed satellite to China because we can't get export license has nothing to do with Loral, has nothing to do with even the satellite industry. It has to do with the highest level of diplomacy between China and the United States. We can't affect that.

With respect to the other issue, it was settled and the State Department and US Government regards Loral as a good citizen and, in fact, we do make products for the government. Within the last month, your officers have been down to the DoD looking at other opportunities for satellite manufacturing and satellite capacity. We know that their demands are growing and we want to match their requirements with our product and I'm hopeful that we'll be able to see an uptick in that government work.

The second issue is that there will be a consolidation in this industry, particularly, in the manufacturing side and probably in the fixed satellite service side, as well. The current economic climate really minimizes the opportunities for consolidation. Companies don't have currency. They don't have the ability to borrow. They don't have stock available to use for acquisitions, and I think we're going to have to work through this economic climate before we see that consolidation. I'm hopeful that Loral at the end of the day will be one of the survivors because I think we're one of the best operators in this field.

This is a company with value, irrespective of the stock price. There are a lot of reasons why the stock price is what it is, but it still has great value. To give you just a little history, the problem for Loral is not that our product is not good or there's not a market for our product. The problem is that we're over-leveraged and we know we've been over-leveraged now for several years.

There are two reasons for our over-leverage. One of them is that we made a bad bet on Globalstar, which although it is a successful system and works well, for the same reasons that the satellite communications industry is in trouble, generally, Globalstar was affected. It couldn't raise more money when it was necessary. Their customers were in trouble. Their partners were in trouble. When I say partners, I'm talking about France Telecom, Alcatel - they were the partners of Globalstar and we all got caught in the same thing, so part of our over-leverage had to do with the residue of our commitment to Globalstar.

The other part of our over-leverage was caused by our investment policy in our fixed satellite service fleet. Six years ago, we had one satellite and today we have seven, going to 10 later this year. That took an enormous amount of capital and caused part of the leverage problem we have today, but that was an investment that was not without value. The amount of value that we created, real value, merchandisable valuable, the amount of value in the fixed satellite service business is far in excess in the investment that we made in it.

What we have to do is to hold on. By the way, the profitability and the cash flow from those assets are very, very good. I would say that our North American satellite fleet is the gem of the industry, are generally the satellites we have work well, make profits and generate cash flow. They all would be sought after by other companies and we may have to use some of those satellites to de-leverage. I'm hopeful that we can maintain as much of the fleet as possible so that we survive going into the future, and be able to take advantage when the turn comes, but don't for a minute equate the stock price, which is relevant to all of us with the question that we do not have value in the asset investments that we made.

Those investments, particularly, in the fixed satellite service segment, are far in excess of our investment and our book value. We will rationalize and realize that value, hopefully soon, as a shareholder and that's what this game plan is all about and it's a timing issue. If we can hold on long enough for that turn to come, we'll be able to restore some of that lost value. We are all working very hard to make that happen.

Question: I have three articles from "Space News" over different periods. The first one back in April talked about Intelsat to purchase Loral satellite performance payments. The second one, Alcatel Space, asked United States Court to block the Intelsat performance payment to Loral. And the last one, only last week, May 19th, Loral offers up satellites to avoid bankruptcy filing.

Bernard Schwartz: "Space News", a very reliable reporter, but unfortunately, not in this case. I don't know where the last article came from. I don't know what they have in mind or what it was about. The fact is that we have a relationship with Alcatel, a very contentious one, over a long period of time. It's a mixed bag. They are our customer, we are their customer, they are our partner, they are our competitor, we hate each other but aside from that. I mean it is a very incestuous relationship and a contentious one.

The issue of selling orbitals is not something that's brand new. We have done that before and it's really nothing more than rationalizing accounts receivable from our customer and monetizing it. That is something that we would do in the future, have done it in the past and that's what Space News is talking about. Alcatel has an interest in those orbitals and they may be in a position to block the deal because they're an interested party. We think that will not happen and think that the newspaper article overstates the case. It is a business, a commercial interest, it will be resolved in a commercial way to everybody's satisfaction in my judgment, and I think near-term as well. So, the article misrepresents the case but to agree there is some validity to it - it represents a commercial dispute that I think will be resolved shortly.

Question: I have over 100,000 shares at a price I don't want to remember. I'm really interested more towards a little insight on the company's debt. We read articles that you're trying to take care of June covenants and go towards possibly selling assets that bring you income, I think about 200 million a year. But, you're also doing things like buying an interest in APT Satellite Holdings. Are you realigning more towards China, Hong Kong or Taiwan with satellite holdings? The assets you picked seem to be in a different area, at least, from what I saw or is it just you've done those things to buy back parts of satellites and then decided you had to do something about the June covenants?

Bernard Schwartz: Well, there are two questions, somewhat related but two questions. Let's talk about the second one first. We have not built a satellite and launched it for our purposes that we do not want to keep. They're all good. They're all valuable. They produce large cash flow for us. The consideration of selling assets in order to de-leverage is a very balanced one.

From time-to-time, we have sold assets. We will consider selling satellite assets in order to de-leverage, and to the degree we have an opportunity to do so, the Board will evaluate very carefully. Now, the issue is which satellites or which assets to you put up for sale. How are you going to use that? How much of a de-leveraging comes out of it? Is it worthwhile on the bottom line? Some of those assets may be very valuable, those that we prefer to keep.

I would say that the North American fleet is unique and very, very special and if we would consider selling that it would be at a value to us that would be very profitable, far above the book value and if we utilize it to de-leverage and it were a good proposition, the Board, I would assume, vote for that.

There are other parts of the world that we think are under served and will be future growth areas. Southeast Asia is one of those. The reason why we bought the Apstar satellite was because we believe in that part of the world, as the future for FSS business there is very, very desirable and secondly, we were able to buy that satellite capacity under extremely favorable conditions. We don't pay for the transponders until we put them into service, which means that we make the investment when the capacity is ready to make money for us, and we can do that over time as the demand builds up. So, there's almost no risk for that satellite at all. But to answer your question, yes, we are looking for expansion in South America and Southeast Asia as very under served and growth markets in the future.

Question: When you're selling a satellite, are you also going to sell the slots?

Bernard Schwartz: Yes. That's the way we go and that would be factored into the price. We're examining several alternatives, all of them good options for the Company, which we believe if we're successful in executing the whole plan, we will be able to emerge with a balanced debt position with a proper creditworthy relationship to our earnings and with an opportunity to grow in the businesses.

Question: Hello, Mr. Schwartz. Every year I come to the meeting and I always ask you the same question: why don't you give up your compensation? And this year you did and I want to thank you, but I wish you would've done it last year.

Bernard Schwartz: I wish I had done it last year, too. It was not a financial decision; it was a decision against advice.

Question: But I have other questions, some of them deal with Alcatel. One of the press releases said that once the payment or whatever the arbitration board decided what kind of compensation you give Alcatel, it may seriously affect Loral's financial situation, maybe, even possible bankruptcy. And I wanted to get an idea as what amount of money, the maximum that Loral could afford to pay if it loses. And number two, Sirius Radio - you own a lot of shares, I believe in Sirius Radio, right?

Bernard Schwartz: Yes, well, I'll answer in just a moment.

Question: OK, Sirius Radio's stock has been trading very actively recently and - into the multimillions of shares. I was just wondering if you were selling any of the holdings you had as you did before while you're taking advantage of this, because I think Sirius Radio is a lousy company.

Bernard Schwartz: I hope they're a good company because they're a good customer, but that's another argument.

Question: Well, I think they're just like Globalstar, that's my opinion. I think they'll file for Chapter 11 sometime in its future, hopefully, before Loral does.

Bernard Schwartz: After we sell our stock, right.

Question: Well that's what I'm hoping. I'm hoping you're getting out of it. I don't know if you remember but you called me on Christmas Eve at home. I wanted to verify that you were actually going to buy back the shares you sold. Now I'm trying to understand what was the motive behind that. You said to me on the phone that selling those shares was strictly a tax maneuver. You had capital gain on some other stocks, perhaps, and you started buying them back but what I see in the insider trading section that there's a lack of directors and other insiders buying aggressively as you have.

And I know when you said to me on the phone that you can't vouch for them but I wanted to know if they are - they don't answer questions to shareholders, the Directors? They just sit there facing the wall sometimes looking at their shoes wondering if they shined them or not, so I'm concerned that their lack of directors that are not buying into the Company.

Now, I still own a lot of shares, and I've got some friends of mine who are World War II veterans who also own shares and they constantly ask me what's happening with Loral? I said, look guys, I go to the annual meeting every year. I ask Bernard; he seems to be a very sincere, genuine guy from Brooklyn who seems to give me a straight answer. But it's true, last year the stock was $2. Yes, this year it's 38 cents, but we're on our way to a new record high. I've been watching that 52-week timeline there, looks like we're going to be at a new record high soon, maybe in a couple of months.

I know I've asked a lot of questions and I know that you hear me talk every year, same sort of stuff. I also notice that we have elaborate security. I go to many shareholder meetings at other companies, but when I asked you at the hotel a couple of years back when we had the elaborate security, you said, this is not Loral's doing. You said this was a hotel requirement.

Now, we're at this fine college, not a hotel. I hope we're saving money, hope we're supporting the college but you have security. Now, I don't believe the college is paying for the security. I believe Loral's paying for the security and I want to really know why you think you need it when other annual meetings that I go to at other companies who have similar problems as Loral do not.

Bernard Schwartz: You called in December and wanted to know why I was selling stock. I told you, as I told everyone else that it had to do with an off line tax consideration and that I intended to buy all the stock back. I did that 31 days afterwards. I bought the stock back. It had to do with reasons other than Loral and I saw no reason not to do that and I feel I've acquitted myself well as far as responsibility to the shareholders and to the employees.

I've been in business a very long time and a lot of it very successful. I have never asked anybody to join a company I was with on the basis of its financial ability to buy stock of the Company. In every case, it was whether or not the individual, he or she, could do the job, whether they had the credentials, whether they were talented and that has always been my criteria, whether you could do the job, not how much you had and the same thing with respect to the directors. I have to tell you it's not fun being a director of Loral. It's no fun being a corporate officer of Loral, but I wouldn't trade it for anything.

Question: I'll take your job.

Bernard Schwartz: You wouldn't take my job; I'm not getting paid. The fact is, it is not a fun business today and I'm lucky that we have a Board of Directors who have a sense of responsibility to the constituent parties of Loral, the shareholders, the employees, the creditors. It's a balanced board. They've been with us a long time and anybody who feels that this is a board that doesn't know what they're doing, keep in mind that this is the same board that sold Loral Corporation for billions of dollars and passed it straight through to shareholders and brought Loral Space to the leadership position in the industry that we operate in.

We're serious people. I am not going to ask any member of the Board or any member of the executive team to buy stock in Loral. And when they come to tell me that they're selling it, I don't ask them why, as long as they're doing their job. That's all you should care about too. That's my standard. If you don't like that standard, you're in the wrong company. It's worked for a long time, though.

With respect to Sirius, we have a very, very small amount left and that will be sold. The game plan with Sirius was that when the stock became available for sale and it was registered, we would sell our stock. It is not, as you have made, a commentary on Sirius's future in our judgment. It was because in our position, we wanted to monetize that stock holding and we did that.

And to answer your first question on Alcatel: one of the things that was very damaging to Loral in the last year was the International Arbitration Panel's decision for Alcatel in terms of the dispute that we have with them. It's a commercial dispute and there is no way that, in my judgment, damages can come anything close to those kind of numbers. Anything beyond two digit numbers would be impossible in my judgment. Can we afford to settle with Alcatel? The answer is yes, when the appropriate time comes for us to settle, but it will be nothing in the area of $300 million that they are asking. It'll be, if at all, much smaller, otherwise we'll litigate it and we'll let it go to where it has to go.

The situation is very fluid. It is not yet resolved. It will not be resolved in any way that will be excessively damaging to this company and it'd probably be a settlement that goes both ways over a whole list of cross commercial complaints, one company against the other.

In other words, it will just not be this one issue. It if settles at all in my judgment it will settle all the issues between us. As I said, we're partners, we're customers, we're suppliers. It's a very integral complex relationship and I think it's best for us, irrespective of the financial arrangement, to wash our hands of that and spend as little time necessary in the future in a non-productive way.

Question: You were talking about that movie, "The Perfect Storm"; I saw that movie, everyone died. The ship sank. I hope that's not what happens to this company. The stock price is 36 cents and let's face it the stock price is the bottom line that's why we're all here. It's really what anyone cares about. I don't care if your geriatrics board has shined its shoes or not, I care about the stock price. The stock price is a gauge of investor confidence in you and in this company.

Now, I don't want to relive past history but your track record hasn't been too good, especially with respect to Globalstar. If I were an investor, someone on Wall Street, why would I want to buy Loral stock today when I don't see anybody else buying it? I don't see you buying it. I always like to see a company where the Chairman is buying the Company's stock. I know you bought some but you really bought back just what you sold. You didn't buy one more share. What message does that send?

I'm not telling you how to do your business, but I mean if people in this room said, yes, Bernard Schwartz is out there buying his company's stock, I think that would be a good sign.

Bernard Schwartz: I understand what you're saying. I'm not sure I agree with your analysis though. In the prior years, two or three years ago, when the stock was going down, I bought a lot of stock for cash. Not exercising stock options or anything like that, for cash. I went to the bank and paid for it. It didn't do anything for the stock. It didn't increase shareholder interest in Loral and if I sold the stock I don't think it would make much difference either.

The fact of the matter is that the Company will be measured and should be measured on the basis of its performance. Its performance is going to be measured or governed by, in our case, the timeliness of an economic turnaround. We are doing what is necessary to protect the assets. I'm willing to be judged by that. I'm also willing to be judged by the stock price and there's no question that in the last two years that's been a failed enterprise. We have not produced the kind of results we would like to.

If I felt that there was someone with a smarter formula or could've used these resources to better, I would feel badly about that. I'm not sure that I know anybody who could have done better given the mission that we had. The shareholders in this room did not buy a guarantee for profit. They did not buy a guarantee against loss. I'm sorry that you've lost money. I've lost money. My colleagues have lost money. I would like to change that and I'm working hard to change it. I am not persuaded that our strategy is wrong. I am not persuaded that our execution is wrong.

For the last two years, I've been saying that market for Loral stock is going to turn on our performance, which will turn on the economy and until that time we will protect our resources. And that's what we're trying to do. The alternative is to go out of business. That will not do much for your stock either. So, it's a difficult circumstance that we're in and we're trying our best to manage with the limited resources that we have. But one of the things I do not feel responsible for is the mistake you made, we all made, in buying into the satellite industry when we did. We all made that same mistake. I will not bear that burden any more so than you as a stockholder.

Question: One other follow up to what this gentleman said about your compensation. Does that hold true for stock options, too? I have the feeling that once you reverse split this stock, chances are its probably going to go down. The short sellers seem to love this company for some reason and once it starts to go down and you potentially dilute, which obviously was on your resolution number three, I imagine that's in the cards to issue more shares for cash and which will further dilute our shareholder value. If you're not going to take a salary, you also sitting here before your shareholders and say you're not going to take stock options too?

Bernard Schwartz: I'm not going to say that to you. I won't, but I mean I don't owe that pledge to the shareholders that I'm not going to use that as compensation for our employees. I don't know an executive who does not take a job in which the package does not include stock options. I don't know that. In my whole wide experience, that's always part of the salary package today.

Question: I don't know an executive that's bankrupted one company and is on the way of bankrupting another.

Bernard Schwartz: Yes, well - I stand charged, OK and at the same conditions, as in both cases, I've had some successful experience of using stock options. And it's a tool. It's nothing more than a tool. I'm not going to take options because my job here does not depend on my compensation. I'm fortunate enough to be able to say that. I do not judge my colleagues on that same basis. They work here and if they're willing to take stock options in this company instead of cash salary, if they're willing to trade that off I'm going to accept that trade. You should, too.

The stock options that are accepted by our employees are taken in lieu of cash. They're making their bet on this company. You've made your bet on this company. I don't know what you do. I'm sure you go out and work and you make a living and I'm hopeful that you have a career path in front of you so that the time spent on your job builds up value for you and your family and your estate.

You know what these people do? They invest their time in Loral. They can't make that up. If the stock goes up next week you're going to make money. The week we spend doing that, these people will lose something they can never get again. They're investing their time, their efforts, their total energy in Loral. I thank god that they are visionary enough or foolish enough to do that but it benefits everybody in this room and I don't want to hear the Board of Directors denigrated. I don't want to hear our employee base denigrated. I'll take whatever hits because I deserve it the hits but the employees in this room, who've gotten stock options in the hope that they were going to get rich just like you and to invest their time to make both promises come true, should be applauded by the people in this room.

Question: One of the things you emphasized last year, this is not an Enron and I believe definitely you're a very ethical person to even put yourself in the same category as Enron is degrading yourself because I think you're just more, you're not a crook, and the fact that you listen to advice and willing to work for no salary I understand, but one of the problems that this company, is the fact that they've issued a lot of projections and they haven't met them. We also have a Board of Directors, nine of them we're in the Company in 1996, basically, when it was formed and if a person put $100 in it, if you look at the prospectus, they got $2 back now. They have lost 98-percent of their value to shareholders. The same board keeps getting re-elected. They come to the annual meetings; they get paid a lot of money, at least $60,000 a year. They have watched the Company's value go down. I usually look at the Board of Directors as having two jobs: one to declare and pay a dividend, and two, to fire the CEO if he's not doing his job. They also are supposed to offer some advice to the CEO. We made some bad decisions. We lost some money but we haven't done anything about the directors. They haven't been there to help us. They're all in there - most of them are in their late 70's or in their 70's.

We have to diversify this board. The stock market is looking at this board and saying it's the same board that we had a long time ago. I think you're a visionary in the Company and you're really a treasure to Loral in many ways and you've probably been helpful. We made some decisions, but if we could reverse it would be nice, but we can't buy stock if we have a Board of Directors that has been staying on that hasn't bought more stock. They take large salaries. We want stockholders representing us on the Board that are willing to take some of the pain and put money into this company like, we, the people that are investing in it and I think that either the Board of Directors should start taking at least half their salary in stock or we should get new directors.

They just come here. They walk straight ahead. They don't turn around. They don't get up and introduce themselves. I've been to a lot of annual meetings and we have a weakness there and its affecting the price of our stock. They didn't help us in getting out of financial trouble. They should have been a little more conservative looking out for the Company.

As far as the employees of this company, they're putting their careers in there, I have no problem paying them well, giving them a chance to make a lot of money in the stock because if they make a lot of money, I make a lot of money. I'm sure we can get directors just as good as these, probably better because they didn't do very well for us. They lost 98-percent of our money. That's my comments.

Bernard Schwartz: Yes, sir.

Question: I just want to know if you are considering doing other work besides building satellites and doing something that NASA's looking forward to, you know, going up to Mars and possibly back to the moon. Are there any other possibilities in that area where you could do subcontracting work?

Bernard Schwartz: Yes, we do work for, and would like to do more work for NASA on a subcontract basis. Usually in partnerships or as a subcontractor to other companies like Raytheon. We're alert to every possibility. Bear in mind, though, that we are really a commercial enterprise. Our products are mostly commercial and although on the commercial side, interestingly enough, like in other technologies, most of the technology is now being developed in commercial situations rather than in the military.

That's a switch over the last 10 years and we're hopeful that we'll be able to participate more and more in defense requirements and we have been active in meeting defense executives at the highest level, trying to participate in their work going forward. It's a balance. It's a balance as far as development and financial resources, and we try to make the right judgments and those opportunities exist, but not as much as we'd like it to.

Yes, sir.

Question: A very quick question. Given the potential dilution that we all face with the authorization of new shares, has the Board considered a stock dividend for existing shareholders out of that largesse that will be potentially put in the market?

Bernard Schwartz: We have from time-to-time thought about stock dividends and frankly, we don't think it's an appropriate time now but will continue to look at that from time-to-time.

Question: One other thing I wanted to ask about - I think Globalstar's coming out of bankruptcy. Are we going to get anything out of Globalstar?

Bernard Schwartz: Yes, Loral is an owner, after the conversion of our debt into equity on a proportionate basis, so we'll have an equity interest, a small one, maybe five to six-percent. We will have in addition to that, however, some significant operating investments in Globalstar. We retain the equity participation in several of the key distributors of Globalstar, the territorial agents. We retain a percentage - an equity interest in the government work for Globalstar and we, hopefully, will be the supplier of additional satellites when the current generation needs replacing.

Question: Have we written it down to zero or is this going to be all gains?

Bernard Schwartz: Yes. We've not written it down completely to zero because there are some investments that are valued by the accountants, and they will not let us reduce it down to zero but I would say that we have a de minimis exposure to anything right now, so it's practically zero.

Question: So, this six-percent is all gain?

Bernard Schwartz: Anything that comes out of it now will be a positive for us, yes.

Question: I have two quick questions. You mentioned before that you're very conscious of your human resources, have you been adjusting the number of employees to your current situation? In other words, is there room to reduce further the number of employees and the second question is, can you comment on your long-term debt and what are the prospects for refinancing?

Bernard Schwartz: Yes. I said in my prepared remarks that we have been very aggressive in downsizing the Company, the divisions, and at the corporate offices as well and we are reassessing that on a continuous basis. That's part of management. We have been very aggressive. I point out two things that may have been missed in the talk. One was that we reduced over the last two years, to the end of this year, about 32-percent of our work force and our indirect costs have gone down 39-percent.

That's ordinarily a demonstration of good management when indirect costs are going down faster than your head count and we've been very aggressive in the application of controls and the reassessment of business levels. We also want to keep the essential resources for our future. It's a balance that we are managing all the time but we're responsive to the issue that as the business has shrunk during this period, we've had to shrink everything else as well and we've done so.

With the debt, the plan that we've been pursuing now and executing, is to reduce debt and as I said, we've been successful in less than two years reducing our debt by $1.2 billion dollars, and we have plans that we hope to be able to execute depending on market circumstances and other things, to continue that program of debt reduction.

Question: I know in January you got this potentially big contract with Raytheon - I think you're partnering with them. Could you just elaborate a little bit what that's all about and what the possible potential is for that, because I have a feeling if that comes through things can turn around rather quickly.

Bernard Schwartz: Yes. We are working with Raytheon. That's a relationship that has developed over the last 12 months, identifying opportunities that will be helpful to each of us. These are governmental programs. There are about four of them, of all sizes, all of them led by Raytheon where we are providing an essential technology as part of their team.

They are competitive contracts - if Raytheon wins we will win. One of them is MUOS. There are space-based programs, as well, at least two others, both of them highly regarded by the military. It's a question of the competition between Raytheon and its competitors. If they win, we win. We're on the team.

In the aggregate, what does that mean? It could mean $2 billion worth of work for Loral over a period of years, but don't count on it. I mean it's long-term, continuous support. One of the problems for the governmental work as compared to commercial work is that the investment period is a long period. You have to be there and continuously be at the switch, but we do hope to get some of that business.

Yes, sir.

Question: Mr. Schwartz, just two quick questions. The second one is, if you could give us just a little bit information about the K&F management services. It's a small contract but because you're involved personally, just a little elucidation and the next question is, if you happen to know if the gentleman from Fremont, California, Harrosh, I think his name is, is here today?

Bernard Schwartz: Yes I do know him, but he is not here today. We have a genial relationship with him. He is one of our many shareholders, who's been generous with his time, as well as with his investment and he is judicious about the time taken but when he calls, it's not so much asking for information but with a suggestion. He's very bright and he's a very creative and experienced individual and it's worth speaking to him. I spoke to him as recently as in the last week, but I would guess that we speak to him about three or four times a year.

Question: OK. Thank you and then the K&F situation.

Avi Katz (VP, General Counsel & Secretary, Loral Space & Communications): K&F shares certain legal services and other administrative services with Loral and they pay us for those services.

Question: You had a press release about the satellite industry overall and that there was probably a demand over the next few years, I think from 2003 to 2007 of approximately 300 satellite orders, not for Loral but for the whole industry, and that we stand a chance of getting about 25-percent of them - is that correct?

Bernard Schwartz: We use different numbers but the idea is that we believe, along with the rest of the industry that the requirement will be for somewhere between 15 and 20 replacement satellites a year for the next couple of years until the economy goes up and we should get our proportionate share, which would be at least 25-percent. What we're trying to say is that the satellite industry should have, different from the last two years, a continuous replacement cycle, plus opportunities generated by new applications and we should get our proportionate share, which varies from time-to-time, but fortunately it's been going up. We've been getting good market share in the satellite manufacturing business.

In fact we have the best satellite products and our customers know that and that's one of the reasons we continue to win and have continued to win and hopefully, we'll be able to resolve our financial problems, we'll be able to be an increasing participant in the available work. Our backlog today accounts for roughly 27 percent of the industry today, and if we get our proportionate share we should be able to get five satellites a year on a regular basis until there's an uptick.

Question: Last year you mentioned that the weakening of the US dollar would have some minimal or not too significant help to Loral overall. Now that the dollar has weakened with the Euro quite a bit from last year, how's Loral perceive that in the pocketbook.

Bernard Schwartz: It's a positive. I didn't say it was an overwhelming positive. I said then it was going to be a minimal positive effect but it's a positive effect and probably has more than a minimal effect.

Question: Do we have any gold reserves?

Bernard Schwartz: No.

Ladies and gentlemen, thank you for being here. This has been a tough time for Loral. It's been a tough time in the industry. We are not unaware that it's a tough time for the shareholders and we thank you for being with us. Thank you.