The terms of MHR’s investment in Loral came with several benefits that increased their control in Loral. In addition to preferred stock voting rights and a one-member board expansion with an MHR nominee, MHR included terms that would protect their investment from a variety of perceived future events by giving them the right of approval. Being the majority preferred stock holder, this approval right was viewed by the Delaware Chancery Court as veto power.

According to a Memorandum of Opinion issued by Vice Chancellor Leo Strine in the Chancery Court of Delaware, preferred stock holders were given “extensive class voting and consent rights that gave MHR the power to veto Loral’s ability to engage in a wide variety of business transactions.

Per the Certificate of Designation, Loral was required to obtain majority approval from preferred stockholders before it could “… authorize, or take any action, directly or indirectly, to alter, repeal, change or amend any provision of the Certificate of Incorporation or this Certificate of Designation, whether by or in connection with any merger, consolidation, reclassification, business combination, exchange, recapitalization, joint venture, partnership, sale, transfer, conveyance, lease, other disposition of all or substantially all of its property or assets, any similar transaction or otherwise, if such authorization or action would reasonably be expected to adversely affect the rights, preferences, privileges or powers of the [Preferred Stock or the common stock] into which the [Preferred Stock is] convertible, or any of the holders thereof…”