SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
January 9, 2002
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LORAL SPACE & COMMUNICATIONS LTD.
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(Exact name of registrant as specified in its charter)
Islands of Bermuda 1-14180 13-3867424
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State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number
c/o Loral SpaceCom Corporation
600 Third Avenue, New York, New York 10016
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 697-1105
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Item 5. Other Events.
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On January 9, 2002, the United States Department of State, Loral Space
& Communications Ltd. ("Loral"), and Space Systems/Loral, Inc. ("SS/L") entered
into a Consent Agreement (the "Consent Agreement") settling and disposing of all
civil charges, penalties and sanctions associated with alleged violations by
SS/L of the Arms Export Control Act and its implementing regulations. The
conduct that gave rise to the alleged violations occurred in connection with the
participation of SS/L employees on an independent review committee ("IRC")
formed in the wake of a 1996 crash of a Long March rocket in China, the purpose
of which was to consider whether studies of the crash made by the Chinese had
correctly identified the cause of the failure. SS/L and Loral neither admit nor
deny the allegations that gave rise to the Consent Agreement.
Loral and SS/L have also been informed that the Justice Department has
terminated its investigation of SS/L relating to this matter and has declined to
pursue the matter further.
The Consent Agreement provides that SS/L will pay the State Department
a civil penalty totaling $14 million over seven years, the cost of which
(approximately $0.04 per share) will be reflected in Loral's 2001 fourth quarter
results. Of this $14 million, $2.2 million is to be paid within ten days of the
date of the administrative order implementing the Consent Agreement and the
remaining $11.8 million is to be paid in equal annual installments of $1,685,714
on the first through seventh anniversaries of the administrative order
implementing the Consent Agreement. The Consent Agreement also assesses an
additional civil penalty of $6 million, which is suspended on the condition that
Loral and SS/L apply this amount over the next seven years (subject to the
following sentence) for the purpose of defraying a portion of the costs
associated with implementing certain export control compliance measures. The
Consent Agreement further provides that $2 million which has already been
expended by SS/L in enhanced export control compliance measures is to be
credited against the $6 million additional penalty.
The Consent Agreement also provides for implementation at SS/L over the
next four years of a strengthened export control compliance program, including
the appointment of a Special Compliance Official and other compliance measures.
In light of these compliance efforts, the Consent Agreement also provides that
the State Department has determined that a prospective debarment of SS/L is not
appropriate.
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With regard to obtaining the approvals required for the launch of
ChinaSat 8 and Apstar V, the Consent Agreement provides that Loral and SS/L
acknowledge that there is no understanding expressed or implied through the
Consent Agreement with respect to a final decision by the Department of State
concerning their interest in the approval of export licenses or other U.S.
Government authorizations necessary to export the ChinaSat 8 or Apstar V
spacecraft. The Consent Agreement also provides that the State Department
agrees, assuming Loral's and SS/L's faithful adherence to the terms of the
Consent Agreement, and the Act and its implementing regulations, that decisions
concerning export licenses for the ChinaSat 8 and Apstar V spacecraft will be
made on the basis of the security and foreign policy interests of the United
States, including matters relating to U.S. relations with the People's Republic
of China, without reference to the State Department's previously expressed
concerns regarding SS/L's reliability, which concerns are considered to be
appropriately mitigated through the operation of various provisions of the
Consent Agreement. Discussions between SS/L and the State Department regarding
SS/L's obtaining the approvals required for the launch of ChinaSat 8 and Apstar
V are continuing.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(c) Exhibits.
Exhibit 10.1 Consent Agreement among the United States Department of State,
Loral Space & Communications Ltd. and Space Systems/Loral, Inc.
dated January 9, 2002
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Loral Space & Communications Ltd.
By: /s/ Avi Katz
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Name: Avi Katz
Title: Vice President and Secretary
Date: January 9, 2002
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EXHIBIT INDEX
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Exhibit Description
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Exhibit 10.1 Consent Agreement among the United States Department of
State, Loral Space & Communications Ltd. and Space
Systems/Loral, Inc. dated January 9, 2002