A. Reserved B. Capitalization and Indebtedness Not applicable. C. Reasons for the Offer and Use of Proceeds Not applicable. D. Risk Factors RISK FACTORS Investing in our Telesat Public Shares involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information contained in this Annual Report, including our consolidated financial statements and the related notes appearing at the end of this Annual Report, before deciding to invest in our Telesat Public Shares. Other risks and uncertainties that we do not presently consider to be material, or of which we are not presently aware, may become important factors that affect our future financial condition and financial performance. If any of those or the following risks actually occur, our business, financial condition, financial performance, liquidity and prospects could suffer materially, the trading price of our Telesat Public Shares could decline and you could lose all or part of your investment. See also “Special Note Regarding Forward-Looking Statements.” Summary of Risks Risks Relating to Telesat’s Liquidity and Capital Resources • Telesat may not be able to generate sufficient cash to service all of the Telesat Canada Debt and may be forced to take other actions to satisfy its obligations under its indebtedness, which may not be successful. If we cannot restructure the Telesat Canada Debt, your investment in Telesat Corporation could be substantially impacted. • Telesat’s level of indebtedness is expected to increase, reducing its financial flexibility and making it more difficult to repay or refinance its indebtedness. • Telesat’s business is capital intensive, and restrictions on its ability to incur additional debt and to take other actions may significantly impair its ability to obtain other financing. Risks Relating to the Business of Telesat • Significant and intensifying competition in the satellite industry, in particular due to the Starlink constellation, and from other providers of communications capacity is expected to result in a loss of revenues and a decline in profitability of Telesat if it fails to compete effectively. • Changes in technology could have a material adverse effect on Telesat’s results. • Telesat’s in-orbit satellites may fail to operate as expected due to operational anomalies resulting in lost revenues, increased costs, and/or termination of contracts. 8 Table of Contents • Telesat may be adversely impacted by anti-satellite weapons or other attacks, which could result in a material loss of revenues. • Changes in consumer demand for traditional television services and expansion of terrestrial networks have adversely impacted the number of subscribers to direct-to-home (“DTH”) television services in North America, which may continue to adversely impact Telesat’s revenues. Fluctuations in available satellite capacity could also adversely affect Telesat’s results. Additional Risks Relating to the Telesat Lightspeed Constellation • There are numerous risks and uncertainties associated with the Telesat Lightspeed constellation. The Telesat Lightspeed constellation network may not technically perform as designed. Failure to develop significant commercial and service operational capabilities in connection with the Telesat Lightspeed constellation could prevent it from achieving commercial viability. Competition from similar providers such as Starlink, Amazon LEO and Eutelsat OneWeb may impact the degree of adoption of Telesat Lightspeed services. Telesat may be unable to comply with the drawdown requirements in respect of the Telesat Lightspeed Financing, to complete the deployment of the Telesat Lightspeed constellation or be unable to raise sufficient capital to fund future expansion of the Telesat Lightspeed constellation, any of which could have a material adverse effect on Telesat’s results of operations, business prospects and financial condition. Risks Relating to Regulatory Matters • Telesat’s operations may be limited or precluded by the rules or processes of the International Telecommunication Union (“ITU”). • Telesat is required to coordinate its operations with those of other satellite operators, with government agencies and with terrestrial operators, depending on country-specific rules. If these agreements cannot be reached, Telesat’s ability to operate may be adversely impacted. • Telesat operates in a highly regulated industry and government regulations may adversely affect its ability to access certain markets, sell its services, increase the price of such services, or otherwise may limit its ability to operate or grow its business. • Telesat Lightspeed operations will depend on the use of spectrum and regulations governing NGSO spectrum, including requirements to share spectrum, which could materially impact the Telesat Lightspeed constellation’s system capacity. • Telesat Lightspeed operations will depend on the use of orbital resources and regulations (some of which are still being developed by national, regional and international bodies) governing the sustainable use of such resources, which could materially impact the Telesat Lightspeed constellation’s ability to access certain markets. • NGSO systems entering the market have triggered increased regulatory activity, including a draft EU Space Act. Existing regulations are changing quickly and new, sometimes stricter regulations, especially for NGSO systems, are being considered. There is a risk that new or revised rules could be adopted that could have a material adverse impact on the Telesat Lightspeed constellation. Risks Relating to Tax Matters • The acquisition, ownership and disposition of Telesat Public Shares and Telesat Partnership Units may have adverse U.S. tax consequences for shareholders of Telesat Corporation, including: Telesat Corporation may have been a passive foreign investment company (a “PFIC”) for 2021, 2022, 2023, 2024 or 2025 and could be classified as a PFIC in 2026 and subsequent taxable years; Telesat Corporation or Telesat Partnership could be treated as a U.S. corporation or as a surrogate foreign corporation for U.S. federal income tax purposes and Loral, an indirect wholly owned subsidiary of the corporation, could be treated as an expatriated entity; the IRS could recharacterize the receipt of Telesat Partnership Units as a receipt of Telesat Public Shares; and non-U.S. holders of Telesat Partnership Units will generally be subject to U.S. withholding with respect to dividends received by Telesat Partnership from Loral. 9 Table of Contents • The acquisition, ownership and disposition of Telesat Public Shares and Telesat Partnership Units may have adverse Canadian tax consequences for shareholders of Telesat Corporation and partners of Telesat Partnership. Risks Relating to the Ownership of Telesat Public Shares and Telesat Partnership Units • Telesat may raise additional equity capital to fund Telesat Lightspeed which could result in potential substantial ownership dilution to the shareholders of Telesat Corporation and holders of Telesat Partnership Units. • Each of MHR and PSP Investments have substantial governance rights over Telesat, and their interests may differ from the interests of the other Telesat Corporation shareholders. • Telesat has certain indemnification and post-Closing obligations to PSP Investments, which in certain circumstances are uncapped and may result in dilution to the other shareholders of Telesat Corporation and holders of Telesat Partnership Units. Risks Relating to Telesat’s Liquidity and Capital Resources Telesat may not be able to generate sufficient cash to service all of the Telesat Canada Debt and may be forced to take other actions to satisfy its obligations under its indebtedness, which may not be successful. If we cannot restructure the Telesat Canada Debt, your investment in Telesat Corporation could be substantially impacted. Telesat’s ability to make scheduled payments on or refinance the Telesat Canada Debt obligations depends on its financial condition and operating performance, which are subject to prevailing economic, industry and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond its control. Telesat may be unable to maintain a level of cash flow from operating activities sufficient to permit it to pay the principal, premium, if any, and interest on its indebtedness. The Telesat Canada Term Loan B and Senior Notes are scheduled to mature between December 2026 and October 2027, resulting in significant obligations that will require repayment or refinancing. These maturities will create liquidity pressure if not addressed. The Company has approximately $509.8 million of cash and cash equivalents of which $206.6 million is held within Telesat Canada and Guarantor entities as at December 31, 2025. The Company and Telesat Canada expect to generate sufficient cash flow to meet the requirements of their respective ongoing operations and debt servicing costs for the reasonably foreseeable future, including at least the one-year period following the date of the financial statements. However, the Company’s consolidated cash flows and cash resources alone, which includes those of Telesat Canada, are not expected to be sufficient to meet Telesat Canada’s debt maturity obligations as they come due. Management is therefore engaged in discussions with lenders’ advisors about refinancing the Telesat Canada Debt. However, there can be no assurance that these refinancing initiatives will be completed successfully. If Telesat Canada cannot refinance or restructure the Telesat Canada Debt, it will be in default and holders of the Telesat Canada Debt could declare all outstanding principal and interest to be due and payable. Its secured lenders (including the lenders under the Senior Secured Credit Facilities, the 2027 Senior Secured Notes and the 2026 Senior Secured Notes) could foreclose against the assets securing their borrowings and Telesat Canada could be forced into bankruptcy or liquidation (as and to the extent applicable to Telesat). A bankruptcy or insolvency by Telesat Canada could substantially impair your investment in Telesat Corporation. The debt obligations of Telesat Canada are guaranteed by certain direct and indirect subsidiaries of Telesat Canada (“Guarantor Entities”) and the obligation for repayment of the credit facilities and senior secured notes upon maturity does not extend beyond these Guarantor Entities. Other indirect wholly owned subsidiaries of Telesat Corporation, which are LEO Non-Guarantors that do not guarantee the Telesat Canada Debt, are building and intend to complete the deployment of, operate and commercialize our Telesat Lightspeed constellation. These LEO Non-Guarantor entities responsible for the Telesat Lightspeed project have a segregated funding source to permit the build out of the Telesat Lightspeed constellation that includes the ability to acquire any necessary intercompany services, such as certain personnel, occupancy, and information systems, currently provided to Telesat LEO ULC by Telesat Canada. In addition to the structural segregation of the LEO Non-Guarantors that own the Telesat Lightspeed business from Telesat Canada and the Guarantor Entities, in September 2025, Telesat Canada distributed 62% of the equity of the LEO Non-Guarantor Entities owning the Telesat Lightspeed business to a Non-Guarantor, wholly owned, indirect 10 Table of Contents subsidiary of Telesat Corporation. Accordingly, only 38% of the equity of the Telesat Lightspeed business is owned by Guarantors of the Telesat Canada Debt. Certain of the Telesat Canada debtholders have instituted legal proceeding to challenge the 62% distribution (See “Our Business — Legal Proceedings”). While we believe the debtholders’ lawsuit to be without merit, there can be no assurance that we will succeed. If the debtholders are successful in this litigation, the Telesat Lightspeed business could become up to 100% owned, directly or indirectly, by the Guarantor Entities or other entities obligated in respect of the Telesat Canada Debt and, in either case, this equity value would be subject to claims of Telesat Canada debtholders in the event of a default under the Telesat Canada Debt. Further, granting pledges of some or all of the 62% of the equity of the Telesat Lightspeed business that is owned by Non-Guarantor Entities to holders of Telesat Canada collateral for the Telesat Canada Debt obligations may be required as a condition of any consensual refinancing or restructuring of the Telesat debt, in which case a substantial portion or all of the value of the Telesat Lightspeed business could be subject to a future claim of Telesat Canada debtholders. In the event that there is a default under the Telesat Canada debt, the lenders under the Telesat Lightspeed Financing could, in certain circumstances, seek to foreclose on the Telesat Lightspeed assets, which itself would substantially impair or completely eliminate the value of your investment in Telesat Corporation. Further, if Telesat is unable to refinance or extend these facilities and Telesat’s cash flow and capital resources are insufficient to fund the Telesat Canada Debt service obligations, it could be forced to dispose of material assets or operations, seek additional debt or equity capital, issue additional equity, or otherwise restructure its indebtedness. Future issuances of equity would dilute the ownership position of shareholders of Telesat and unitholders of Telesat Partnership. Telesat may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow it to meet its scheduled debt service obligations. The terms of the Telesat Canada Debt restrict its ability to dispose of assets and use the proceeds from those dispositions and may also restrict its ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. Telesat may not be able to consummate those dispositions or obtain proceeds in an amount sufficient to meet any debt service obligations then due. Telesat’s level of indebtedness may increase and reduce its financial flexibility. Telesat Canada has a significant amount of debt. As at December 31, 2025, it had total debt of $2,944.6 million maturing in December 2026, June and October 2027. The terms governing the Telesat Canada Debt allow Telesat to incur additional debt, subject to certain limitations. Its borrowings, current and future, will require interest payments and need to be repaid or refinanced, could require it to divert funds identified for other purposes to debt service and could create additional cash demands or impair its liquidity position and add financial risk to it. Diverting funds identified for other purposes for debt service may adversely affect Telesat’s business and growth prospects. If it cannot generate sufficient cash flow from operations to service its debt, it may need to refinance its debt at higher rates, dispose of assets, reduce or delay expenditures or issue equity to obtain necessary funds. Telesat does not know whether it would be able to take any of these actions on a timely basis, on terms satisfactory to it or at all. Telesat Canada’s substantial amount of debt may have important consequences. For example, it may: make it more difficult for it to satisfy its obligations under the Telesat Canada Debt; increase its vulnerability to general adverse economic and industry conditions; require it to dedicate a substantial portion of its cash flow from operations to make interest and principal payments on its debt, thereby limiting the availability of its cash flow to fund future capital expenditures, working capital and other general corporate requirements; limit its flexibility in planning for, or reacting to, changes in its business and in the industries that it services; place it at a competitive disadvantage compared with competitors that have less debt; and limit its ability to borrow additional funds, even when necessary to maintain adequate liquidity. In addition to its debt service obligations, its operations require material expenditures on a continuing basis. Telesat’s ability to make scheduled debt payments, to refinance its obligations with respect to its indebtedness and to fund capital and non-capital expenditures necessary to maintain the condition of its operating assets and properties, as well as its capacity to fund the growth of its business, depends on its financial and operating performance. General economic conditions and financial, business and other factors affect operations and future performance. Many of these factors are beyond Telesat’s control. Telesat may not be able to generate sufficient cash flows to pay the interest on its debt, and future working capital, borrowings or equity financing may not be available to pay or refinance such debt. 11 Table of Contents The agreements governing Telesat Canada Debt, including the indentures governing its Senior Notes and the credit agreement governing its Senior Secured Credit Facilities (“Credit Agreement”), contain various covenants that impose restrictions on it that may affect its ability to operate its business. The agreements governing the Telesat Canada Debt, including the indentures governing its Senior Notes and the Credit Agreement, impose operating and financial restrictions on its activities. These indentures, the Credit Agreement and future debt agreements may also limit or prohibit Telesat Canada’s ability to, among other things: • incur additional debt and issue disqualified stock and preferred shares; • create liens; • pay dividends, acquire shares of capital stock, make payments on subordinated debt or make investments; • create or permit to exist specified restrictions on its ability to receive distributions from restricted subsidiaries; • make certain investments; • issue guarantees; • issue or sell the capital stock of restricted subsidiaries; • sell or exchange assets; • enter into certain transactions with affiliates; and • effect mergers, consolidations, amalgamations and transfers of all or substantially all assets. These restrictions on Telesat Canada’s ability to operate its business could seriously harm its business by, among other things, limiting its ability to take advantage of financing, merger and acquisition and other corporate opportunities. Various risks, uncertainties and events beyond Telesat’s control could affect its ability to comply with these covenants. Failure to comply with any of the covenants in its existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity for the debt under these agreements and to foreclose upon any collateral securing the debt. Under these circumstances, Telesat Canada might not have sufficient funds or other resources to satisfy all of its obligations, including its obligations under the Senior Notes. Telesat LEO ULC and certain of its affiliates have a significant amount of debt and will incur substantial additional debt, all of which is secured by substantially all of the assets related to the Telesat Lightspeed constellation. Telesat is developing, funding, constructing and will operate and commercialize, its Telesat Lightspeed constellation, in Telesat LEO ULC. and its wholly owned subsidiaries which are parties to the Telesat Lightspeed Financing. As at December 31, 2025, borrowings under the Telesat Lightspeed Financing totaled $690 million and that amount will substantially increase over time as Telesat continues to draw down on the loans to finance the deployment of the Telesat Lightspeed constellation. The Telesat Lightspeed Financing debt is secured by substantially all of the assets related to the Telesat Lightspeed constellation. 12 Table of Contents The agreements governing the Telesat Lightspeed Financing contain various covenants that impose restrictions on it that may affect its Telesat’s ability to operate its LEO business. The agreements governing the Telesat Lightspeed Financing impose operating and financial restrictions on Telesat LEO ULC, its subsidiaries and the other guarantors thereunder in connection with their activities which include, among other things restrictions relating to: • the incurrence of additional debt; • creating any additional liens on the Telesat Lightspeed assets; • paying dividends, acquiring shares of capital stock, or making investments; • issuing guarantees; • pledging, issuing or selling capital stock; • selling assets; • entering into certain transactions with affiliates; • effecting mergers, consolidations, amalgamations and transfers of all or substantially all of its assets of the Telesat ULC and its subsidiaries supporting the Telesat Lightspeed Financing; • maintaining minimum levels of liquidity and leverage ratios which ratios reduce over time; • ensuring Telesat LEO ULC and its subsidiaries supporting the Telesat Lightspeed Financing operate with a significant degree of independence from Telesat Canada’s GEO business; • providing any financial assistance to any affiliates other than Telesat LEO ULC’s subsidiaries supporting the Telesat Lightspeed Financing; • compensation payable to senior management; • relocation of management or certain operations outside of Canada and/or Quebec; and • the creation and maintenance of employment, operating expense and capital expense levels in Canada and/or in Quebec; These restrictions may negatively impact Telesat’s business by, among other things, limiting its ability to take advantage of financing, merger and acquisition and other corporate opportunities. Various risks, uncertainties and events beyond Telesat’s control could affect its ability to comply with these covenants. Failure to comply with any of the covenants could result in a default under these agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity for the debt under these agreements and to foreclose upon any collateral securing the debt. Under these circumstances, Telesat might not have sufficient funds or other resources to satisfy all of its obligations. The limitations imposed by financing agreements on Telesat’s ability to incur additional debt and to take other actions might significantly impair its ability to obtain other financing or refinancing. To service its debt, Telesat will require a significant amount of cash, which may not be available. Telesat’s ability to make payments on or repay or refinance its debt and to fund planned capital expenditures will depend largely upon its future operating performance. Telesat’s future performance, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. In addition, Telesat’s ability to borrow funds in the future to make payments on and refinance its debt will depend on the satisfaction of the covenants in agreements governing the Telesat Canada Debt and the Telesat Lightspeed Financing and other agreements it may enter into in the future. These agreements contain limitations on its ability to incur additional debt. Telesat cannot assure you that its business will generate sufficient cash flow from operations or that future borrowings will be available to it to enable it to pay its debt or to fund its other liquidity needs. In addition, Telesat’s ability to raise additional capital to refinance its debt to fund its operations is also dependent on capital market conditions. 13 Table of Contents Telesat’s ability to restructure or refinance its debt will depend on the condition of the capital markets and its financial condition at such time. Any refinancing of its debt could be at higher interest rates and may require it to comply with more onerous covenants, which could further restrict its business operations. In addition, the terms of existing or future debt agreements, including those governing the Telesat Canada Debt, may restrict Telesat from adopting some of these alternatives. In the absence of such operating results and resources, it could face substantial liquidity problems and might be required to dispose of material assets or operations to meet its debt service and other obligations. It may not be able to consummate those dispositions for fair market value or at all. Furthermore, any proceeds that Telesat could realize from any such dispositions may not be adequate to meet its debt service obligations then due. The ratings assigned to Telesat’s debts by rating agencies, and any lowering or withdrawal thereof, may increase Telesat’s future borrowing costs and reduce Telesat’s access to capital. Telesat’s ability to access capital markets is important to its ability to operate its business Changes in Telesat’s financial performance and unfavorable conditions in the capital markets, including increased scrutiny of the satellite industry and the impact of regulation, could result in credit agencies reexamining Telesat’s credit ratings. The Senior Notes have a non-investment grade rating, and any rating assigned could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. A downgrade in Telesat’s credit ratings could restrict or discontinue Telesat’s ability to access capital markets at attractive rates and increase Telesat’s borrowing costs. There can be no assurance that any rating assigned to any of Telesat’s debt securities will remain in effect for any given period of time or that any such ratings will not be lowered, suspended or withdrawn entirely by a rating agency if, in that rating agency’s judgment, circumstances so warrant. The credit rating agencies have also previously denoted Telesat as being in “selective default” at the corporate level as a result of having repurchased a portion its debt and they may do so again in the future. Absent an improvement in our ratings, the lowering of Telesat’s credit rating, and any future lowering of Telesat’s credit ratings, may make it more difficult or more expensive for Telesat to obtain additional debt financing or refinance its current debt. Telesat’s variable rate indebtedness subjects Telesat to interest rate risk, which could cause Telesat’s debt service obligations to increase significantly. Borrowings under the Senior Secured Credit Facilities and the Telesat Lightspeed Financing are at variable rates of interest and will expose Telesat to interest rate risk. Telesat has entered into, and in the future Telesat may enter into, interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, Telesat may not maintain interest rate swaps with respect to all or any of its variable rate indebtedness, and any swaps Telesat enters into may not fully mitigate Telesat’s interest rate risk, may prove disadvantageous or may create additional risks. Risks Relating to the Business of Telesat Corporation Telesat is subject to significant and intensifying competition within the satellite industry and from other providers of communications capacity. A failure to compete effectively would result in a loss of revenues and a decline in profitability, which would adversely affect Telesat’s results of operations, business prospects and financial condition. Telesat provides point-to-point and point-to-multipoint services for voice, data and video communications and for high-speed internet access. Telesat competes against global competitors who are substantially larger than it in terms of both the number of satellites in orbit as well as in terms of revenues. Due to their larger sizes, these operators are able to take advantage of greater economies of scale, may be more attractive to customers, may have greater flexibility to restore service to their customers in the event of a partial or total satellite failure and may be able to offer expansion capacity for future requirements. Telesat also competes against regional satellite operators who may enjoy competitive advantages in their local markets. Telesat’s business is also subject to competition from ground-based forms of communications technology. For many point-to-point and other services, the offerings provided by terrestrial companies can be more competitive than the services offered via satellite. Increasing availability of capacity from other forms of communications technology 14 Table of Contents can create an excess supply of telecommunications capacity, decreasing the prices Telesat would be able to charge for its services under new service contracts and thereby negatively affecting profitability. New technology has rendered traditional satellite-based services less competitive by satisfying consumer demand in other ways. See: “Changes in technology could have a material adverse effect on Telesat’s results of operations, business prospects and financial condition”. Telesat also competes for local regulatory approval in places where more than one provider may want to operate, and with other satellite operators for scarce frequency assignments and a limited supply of orbital locations. A failure to compete effectively could result in a loss of revenues and a decline in profitability, a decrease in the value of Telesat’s business and a downgrade of Telesat’s credit rating, which would restrict its access to the capital markets. Changes in technology could have a material adverse effect on Telesat’s results of operations, business prospects and financial condition. The implementation of new technologies that can provide increased capacity to end-users at lower cost may reduce demand for Telesat’s services. Many of the GEO satellites deployed over the last decade are high throughput satellites (“HTS”), which are able to transmit substantially more data than pre-existing satellites or may include high throughput payloads. The introduction of more, and more capable, HTS by other operators into the markets in which Telesat participates could have a material adverse effect on results of operations, business prospects and financial condition. A number of NGSO satellite projects are in development, production, in the process of being deployed, or in operation, including Starlink and Amazon’s subsidiary Amazon LEO (referenced herein as “Amazon”), which have significant advantages over GEO satellite systems, in particular for latency sensitive applications. These NGSO networks have substantially increased the amount of available capacity in the marketplace, decreasing demand for GEO satellite services. Improvements in existing technologies could also adversely impact the demand for satellite services. For example, improvements in signal compression have allowed, and may continue to allow, Telesat customers to transmit the same amount of data using a reduced amount of capacity, decreasing demand for Telesat services. Telesat’s satellites may fail to operate as expected due to operational anomalies resulting in lost revenues, increased costs and/or termination of contracts. Satellites utilize highly complex technology and operate in the harsh environment of space and therefore are subject to significant operational risks while in orbit. These risks include equipment failures, malfunctions and other kinds of problems commonly referred to as anomalies. Some of Telesat Corporation’s satellites have had malfunctions and other anomalies in the past. Acts of war, terrorism, magnetic, electrostatic or solar storms, space debris, satellite conjunctions or micrometeoroids could also damage satellites. Satellite anomalies are likely to be experienced in the future. Despite working closely with satellite manufacturers to determine the causes of anomalies and mitigate them in new satellites and to provide for intra-satellite redundancies for certain critical components to minimize or eliminate service disruptions in the event of failure, Telesat cannot assure you that, in these cases, it will be possible to restore normal operations. Where service cannot be restored, the failure could cause the satellite to have less capacity available for sale, to suffer performance degradation or to cease operating prematurely, either in whole or in part. Any single anomaly or series of anomalies or other failure (whether full or partial) of any of Telesat’s satellites could cause revenues, cash flows and backlog to decline materially, could require Telesat to repay prepayments made by customers of the affected satellite and could have a material adverse effect on relationships with current customers and Telesat’s ability to attract new customers for satellite services. A failure could result in a customer terminating its contract for service on the affected satellite. Finally, the occurrence of anomalies may adversely affect Telesat’s ability to insure satellites at commercially reasonable premiums, if at all, and may cause insurers to demand additional exclusions in policies they issue. 15 Table of Contents A number of Telesat’s in-orbit satellites have experienced anomalies and may in the future experience further anomalies that may affect their performance. Past anomalies include: Nimiq Satellites: In January 2024, Nimiq 4 suffered a failure of a north/south thruster. Normal station-keeping operations continue utilizing a redundant thruster. If the redundant thruster were to fail, and alternative operational approaches cannot be developed, the satellite would need to transition to inclined operations. Telstar Satellites: Telstar 12 VANTAGE began to suffer from degraded performance of four channels in late December 2016 due to increased noise levels. Following an investigation with the satellite manufacturer, the root cause of the anomaly was determined. As a result of this degradation, two channels on T12V are no longer usable. In 2017, Telesat received insurance proceeds in connection with this anomaly. Degradation of performance was observed on additional channels in May 2018 due to increased noise levels. The satellite manufacturer investigation concluded that the root cause of the anomaly was similar to that of the 2016 anomaly. The channels continue to support service. In the event of further degradation, Telesat may lose the capability to continue to use two channels. Telstar 19 VANTAGE has suffered a number of failures of heaters that support the operation of two of the three battery packs on the satellite. There is a risk that the satellite may experience additional heater failures. The functionality of the batteries and services on Telstar 19 VANTAGE have not been impacted by the failures thus far. Tests performed in orbit and on the ground have validated operational workarounds that Telesat can implement to maintain battery function in the event Telstar 19 VANTAGE were to suffer additional heater failures on the batteries. The actual orbital maneuver lives of Telesat satellites may be shorter than it anticipates, and it may be required to reduce available capacity on its satellites prior to the end of their orbital maneuver lives. For all but one of Telesat’s GEO satellites, the current expected end-of-orbital maneuver life date goes beyond the manufacturer’s end-of-service life date. A number of factors will affect the actual commercial service lives of Telesat satellites, including: the amount of propellant used in maintaining the satellite’s orbital location or relocating the satellite to a new orbital location (and, for newly-launched satellites, the amount of propellant used during orbit raising following launch); the durability and quality of their construction; the performance of their components; conditions in space such as solar flares and space debris; operational considerations, including operational failures and other anomalies; and changes in technology which may make all or a portion of its satellite fleet obsolete. Telesat has been forced to remove satellites from service prematurely in the past due to an unexpected reduction in their previously anticipated end-of-orbital maneuver life. It is possible that the actual orbital maneuver lives of one or more of the existing satellites may also be shorter than currently anticipated. Further, on some of the satellites it is anticipated that the total available payload capacity may need to be reduced prior to the satellite reaching its end-of-orbital maneuver life. A reduction in the orbital maneuver life of any of the satellites could result in a reduction of the revenues generated by that satellite, the recognition of an impairment loss and an acceleration of capital expenditures. To the extent Telesat is required to reduce the available payload capacity prior to the end of a satellite’s orbital maneuver life, revenues from the satellite would be reduced. Insurance will not protect Telesat against all satellite-related losses. Further, Telesat may not be able to renew insurance on its existing satellites or obtain insurance on future satellites on acceptable terms or at all, and, for all but one of Telesat’s existing GEO satellites, Telesat has elected to forego obtaining insurance. Telesat’s current satellite insurance does not protect it against all satellite-related losses that it may experience, and Telesat only has in-orbit insurance coverage for one of the satellites in its fleet. Telesat’s insurance does not protect it against business interruption, loss of revenues or delay of revenues. Telesat’s in-orbit insurance policies typically include specified exclusions, deductibles and material change limitations, and future insurance policies are expected to continue to include such features. Typically, these insurance policies exclude coverage for damage or losses arising 16 Table of Contents from acts of war, antisatellite devices, electromagnetic or radio frequency interference and other similar potential risks for which exclusions are customary in the industry at the time the policy is written. In addition, they typically exclude coverage for satellite health-related problems affecting the satellites that are known at the time the policy is written or renewed. Any claims under existing policies are subject to settlement with the insurers and may, in some instances, be payable to Telesat’s customers. The price, terms and availability of satellite insurance has fluctuated significantly in recent years. These fluctuations may be affected by recent satellite launch or in-orbit failures and general conditions in the insurance industry. Launch and in-orbit policies on satellites may not continue to be available on commercially reasonable terms or at all. To the extent Telesat experiences a launch or in-orbit failure that is not fully insured, or for which insurance proceeds are delayed or disputed, Telesat may not have sufficient resources to replace the affected satellite. In addition, higher premiums on insurance policies increase costs, thereby reducing profitability. Future insurance policies may also have higher deductibles, shorter coverage periods, higher loss percentages required for constructive total loss claims and additional satellite health-related policy exclusions, all of which would reduce Telesat’s expected profitability. There can be no assurance that, upon the expiration of an in-orbit insurance policy, which typically has a term of one year, Telesat will be able to renew the policy on terms acceptable to it. Telesat may elect to reduce or eliminate insurance coverage, or elect not to obtain insurance policies for its future satellites, especially if exclusions make such policies ineffective, the costs of coverage make such insurance impractical or self-insurance is deemed more cost effective. Telesat is currently only carrying in-orbit insurance on its Telstar 19 VANTAGE satellite. Telesat derives a substantial amount of its revenues from only a few of its customers. A loss of, or default by, one or more of these major customers, or a material adverse change in any such customer’s business or financial condition, could materially reduce Telesat’s future revenues and contracted backlog. For the year ended December 31, 2025, Telesat’s top five GEO customers together accounted for approximately 64% of its revenues. As at December 31, 2025, Telesat’s top five backlog GEO customers together accounted for approximately 62% of its GEO backlog. If any of its major customers were to terminate, or choose not to renew, their contracts at the expiration of the existing terms or are able to negotiate concessions, particularly on price, it could have a material adverse effect on results of operations, business prospects and financial condition. Telesat customers could experience a downturn in their business, find themselves in financial difficulties, allege Telesat is in breach of its obligations to them and purport to terminate their contracts, any of which could result in their ceasing or reducing their use of Telesat services, becoming unable or refusing to pay for services they had contracted to buy. In addition, some of Telesat’s customers’ industries are undergoing significant consolidation, and Telesat customers may be acquired by each other or other companies, including by Telesat competitors. Such acquisitions could adversely affect Telesat’s ability to sell services to such customers and to any end-users whom they serve. Some customers have in the past defaulted, and customers may in the future default, on their obligations to Telesat due to bankruptcy, lack of liquidity, operational failure or other reasons. Such defaults could adversely affect revenues, operating margins and cash flows. If Telesat’s contracted revenue backlog is reduced due to the financial difficulties of, or disputes with, its customers, revenues, operating margins and cash flows would be negatively impacted. Telesat’s business is capital intensive and it may not be able to raise adequate capital to finance its business strategies, or it may be able to do so only on terms that significantly restrict its ability to operate its business. Implementation and maintenance of Telesat’s business strategy requires a substantial outlay of capital. As it pursues its business strategies and seeks to respond to developments in its business and opportunities and trends in its industry, Telesat’s actual capital expenditures may differ from expected capital expenditures. There can be no assurance that Telesat will be able to satisfy capital requirements in the future. In addition, if one of its satellites fails unexpectedly, there is no assurance Telesat will be able to obtain additional financing to replace the satellite. If Telesat determines it needs to obtain additional funds through external financing and is unable to do so, it may be prevented from fully implementing its business strategy. The availability and cost to Telesat of external financing depends on a number of factors, including its credit rating, financial performance, and general market conditions. Telesat’s ability to obtain financing generally may be influenced by the supply and demand characteristics of the telecommunications sector in general and of the satellite services sector in particular. Declines in Telesat revenues and the challenging business conditions faced by Telesat customers are among the other factors that may adversely affect Telesat’s credit, access to the capital markets and ability to refinance its existing debt. Other factors that could negatively impact Telesat’s credit, access to the capital markets 17 Table of Contents and ability to refinance its existing debt include the amount of debt in its current capital structure and the expected increase in its debt, activities associated with strategic initiatives, the health of its satellites, the success or failure of its planned launches, its expected future cash flows and the capital expenditures required to execute its business strategy. The overall impact on its financial condition of any transaction that it pursues may be negative or may be negatively perceived by the financial markets and rating agencies and may result in adverse rating agency actions with respect to Telesat’s credit rating and access to the capital markets. Long-term disruptions in the capital or credit markets as a result of uncertainty, inflation, rising interest rates or recession, changing or increased regulation or failures of significant financial institutions could adversely affect its access to capital. A credit rating downgrade or deterioration in Telesat’s financial performance or general market conditions could limit its ability to obtain financing or could result in any such financing being available only at greater cost or on more restrictive terms than might otherwise be available and, in either case, could result in Telesat deferring or reducing capital expenditures, including on new or replacement satellites, or being unable to refinance its debt. Telesat satellite launches may be delayed, it may suffer launch failures or its satellites may fail to reach their planned orbital locations. Any such issue could result in the loss of a satellite or cause significant delays in the deployment of the satellite which could have a material adverse effect on results of operations, business prospects and financial condition. Delays in launching satellites and in the deployment of satellites are not uncommon and result from construction delays, the unavailability of reliable launch opportunities with suppliers, delays in obtaining required regulatory approvals and launch failures. If satellite construction schedules are not met, a launch opportunity may not be available at the time the satellite is ready to be launched. Satellites are also subject to certain risks related to failed launches. Launch vehicles may fail. Launch failures result in significant delays in the deployment of satellites because of the need to construct replacement satellites and to obtain another launch vehicle. A delay or perceived delay in launching a satellite, or replacing satellites, may cause Telesat’s current or future customers to move to another satellite provider if they determine that the delay may cause an interruption in continuous service or a delay in the commencement of service. In addition, Telesat’s contracts with customers who purchase or reserve satellite capacity may allow the customers to terminate their contracts in the event of a delay. Any such termination would require Telesat to refund any prepayment it may have received, and would result in a reduction in its contracted backlog and would delay or prevent it from securing the commercial benefits of new satellites. As of the date of this Annual Report, Telesat has not received any prepayments from customers of its Telesat Lightspeed constellation that would need to be refunded in the event of significant delays in launching such satellites (nor would there be other contractual penalties or damages to such customers for such delays). It is possible that future agreements may include prepayments for services which would need to be repaid, or provide for other contractual penalties or damages, if the Telesat Lightspeed constellation is delayed. Telesat may choose not to, or be unable to, replace some or all of its satellites upon their end of life and, in the event it chooses to replace a satellite upon the end of its service life, it would require Telesat to make significant expenditures and may require it to obtain shareholder approval. In order to justify the cost of replacing a satellite at the end of its life, there must be sufficient demand for services, and sufficient spectrum available to Telesat to provide those services, such that a reasonable business case can be made for its replacement. If there is insufficient demand for a replacement, or if Telesat does not have sufficient spectrum available to it, as a result of the repurposing of C-band and/or Ka-band spectrum for terrestrial use or otherwise, Telesat may choose not to replace a satellite at the end of its life. In the event we are unable or choose not to replace a satellite at the end of its life and we want to maintain the revenues from customers on these satellites, we will need to provide them with alternate capacity and acquiring such alternate capacity may increase our costs of providing services. We do not intend to replace all our satellites that are nearing their end of life. There are technologies available that have the potential to extend the life of satellites nearing their end of life. There can be no assurance that we will acquire any life extension services or that such life extension services would be successful. For some of our GEO satellites, we intend to provide continuity of service to our customers at the end of life of those satellites by transitioning services to our Telesat Lightspeed constellation. Given that the entry into service of our Telesat Lightspeed constellation is expected to occur after certain of our GEO satellites have reached their end-of-life, we may be unable to provide many of our customers on satellites nearing their end of life with continuity of service. If we are unable to provide continuity of service to our customers by extending the life of such satellites or providing alternate capacity on other satellites, including our Telesat Lightspeed constellation, our revenue would decline. 18 Table of Contents In order to replace a GEO satellite prior to its end of service life, the construction of a replacement GEO satellite must commence approximately three to five years prior to the expected end of service life of the satellite then in orbit. Typically, the construction, launch and insurance of a GEO satellite costs in the range of US$200,000,000 to US$500,000,000. There is no assurance that Telesat will have sufficient cash, cash flow or be able to obtain third-party or shareholder financing to fund such expenditures on favorable terms, if at all. Moreover, the Telesat Articles provide that the power of Telesat’s board to issue securities of Telesat cannot be delegated to a committee, and, consequently, so long as designees of PSP Investments and MHR hold a combined majority of the seats on Telesat’s board, the approval of at least the designees of PSP Investments or of MHR is required for Telesat to issue securities. In the event that Telesat determines to finance expenditures to replace satellites by issuing securities, such designees could block such a financing. Should Telesat not have sufficient funds available to replace those satellites or Telesat be unable to finance such replacements, because of PSP Investments’ and MHR’s determining not to approve such financing or otherwise, it could have a material adverse effect on Telesat’s results of operations, business prospects and financial condition. Telesat may experience a failure of ground operations infrastructure or interference with its satellite signals that impairs the commercial performance of, or the services delivered over, its satellites or the satellites of other operators for whom it provides ground services, which could result in a material loss of revenues. Telesat operates an extensive ground infrastructure including its satellite control centre in Ottawa, its main earth station and back up satellite control facility at Allan Park, Ontario, nine other earth stations throughout Canada, two teleports in the U.S. and one teleport located in Brazil. These ground facilities are used for controlling Telesat’s GEO satellites and/or for the provision of end-to-end services to its customers. Telesat is also in the process of building a global network of landing stations to support the operation of the Telesat Lightspeed constellation. Telesat may experience a partial or total loss of one or more of these facilities due to natural disasters (tornado, flood, hurricane or other such acts of God), fire, vandalism, or other catastrophic events. A failure at any of these facilities could cause a significant loss of service for its customers. Additionally, it may experience a failure in the necessary equipment at the satellite control center, at the back-up facility, or in the communications links between these facilities and remote earth station facilities. A failure or operator error affecting tracking, telemetry and control operations might lead to a breakdown in the ability to communicate with one or more satellites or cause the transmission of incorrect instructions to the affected satellite(s), which could lead to a temporary or permanent degradation in satellite performance or to the loss of one or more satellites. Intentional or non-intentional electromagnetic or radio frequency interference could result in a failure of its ability to deliver satellite services to customers. A failure of any of Telesat’s facilities or in the communications links between facilities or interference with its satellite signal could cause revenues and backlog to decline materially and could adversely affect its ability to market its services and generate future revenues and profit. Telesat purchases equipment from third-party suppliers and depends on those suppliers to deliver, maintain and support these products to the contracted specifications in order for it to meet its service commitments to its customers. Telesat may experience difficulty if these suppliers do not meet their obligations to deliver and support this equipment. Telesat may also experience difficulty or failure when implementing, operating and maintaining this equipment, or when providing services using this equipment. This difficulty or failure may lead to delays in implementing services, service interruptions or degradations in service, which could cause revenues and backlog to decline materially and could adversely affect Telesat’s ability to market its services and generate future revenues and profit. Telesat may be adversely impacted by anti-satellite weapons or other attacks, which could result in a material loss of revenues. Anti-satellite weapons may be tested or employed upon Telesat’s satellites or third-party satellites, which could result in the direct loss of a Telesat satellite, intentional interference with its communications and/or may result in significant increases in orbital debris which may extend to the orbits utilized by Telesat satellites. Increased levels of orbital debris will increase the chance that Telesat satellites may be damaged or destroyed. Telesat’s ground facilities and operations may also be damaged or destroyed by acts of war or terrorism. Telesat’s current satellites provide services to governments, and it is expected that governments will be a significant user of Telesat Lightspeed services, in particular its military Ka-band (Mil-Ka) services. Utilization of Telesat services by governments could increase the risk of our satellites, ground facilities and operations being targeted. 19 Table of Contents Telesat’s dependence on third party suppliers could result in delays related to the design, manufacture and launch of new satellites, or could limit its ability to sell its services, which could adversely affect operating results and prospects. Any delays in the design, construction or launch of its satellites or the acquisition of ground technologies to operate its business could have a material adverse effect on Telesat’s results of operations, business prospects and financial condition. There are a limited number of manufacturers that are able to design and build satellites according to the technical specifications and standards of quality Telesat requires. Telesat also relies on the manufacturers of its satellites to provide support throughout the life of the satellite in the event it should suffer an anomaly. If any of its manufacturers’ businesses fail, it could adversely impact Telesat’s ability to overcome a satellite anomaly and maintain its satellites in service, in whole or in part. There is also a limited number of suppliers able to launch such satellites, including Arianespace, Blue Origin, ISRO, Mitsubishi Heavy Industries, Rocket Lab, SpaceX, and United Launch Alliance. Should any of its manufacturers’ or launch suppliers’ businesses fail, or should there be consolidation in the industry (such as the announced combination of certain of Airbus Defence and Space and Thales Alenia operations), it would reduce competition and could increase the cost of satellites and launch services. Adverse events with respect to any of Telesat’s manufacturers or launch suppliers could also result in the delay of the design, construction or launch of satellites. Certain launch providers may be unavailable to us either because they are unwilling to provide us with services, because they compete with us or for other reasons, or because we are unable to access their services for regulatory reasons, including as a result of government sanctions. There is also a limited number of suppliers of other technologies and services required for our operations. Many of these suppliers’ businesses have been adversely impacted by a downturn in the number of GEO satellites being deployed as the GEO satellite business has been negatively impacted by a number of factors, including the commercial success of NGSO constellations, the vertical integration of certain NGSO satellite operators, such as SpaceX and Amazon, which build their own satellites in addition to operating their NGSO constellations, as well as the decline in subscribers to Direct to Home (DTH) satellite televisions services. If these businesses were to fail, it could significantly increase our costs. Demand for technology and services from outside of the satellite industry may have an adverse impact on the availability and cost of technology and services Telesat requires for its business. For example, the surge in demand for certain components, including computer servers and networking gear, caused by the rapid construction of facilities to serve the Artificial Intelligence industry, has substantially increased the cost and has caused significant delays in Telesat acquiring, certain components Telesat requires for its current GEO business and for the construction and deployment of the Telesat Lightspeed constellation. General economic conditions, trade restrictions, and other disruptions due to geopolitical conditions and global health emergencies may also affect the ability of Telesat’s suppliers to provide services on commercially reasonable terms or to fulfil their obligations in terms of manufacturing schedules, delivery schedules, launch dates, pricing or other items. Even where alternate suppliers for such services are available, Telesat may have difficulty identifying them in a timely manner, or it may incur significant additional expense in changing suppliers, which could result in difficulties or delays in the design, construction or launch of satellites and the deployment and operation of our Telesat Lightspeed network. Changes in consumer demand for traditional television services and expansion of terrestrial networks have adversely impacted the number of subscribers to DTH television services in North America, which have adversely impacted current and may adversely impact future revenues. A substantial amount of Telesat’s GEO revenue is earned from customers who use its services to provide DTH television services to the public in North America. For the year ended December 31, 2025, approximately 93% of Telesat’s broadcast revenue was derived from North American DTH television services. For various reasons, the number of DTH subscribers to whom Telesat’s customers provide services has been decreasing. In many regions of the world, including North America, the terrestrial networks with which Telesat competes continue to expand. Terrestrial networks have advantages over traditional DTH services for the delivery of two-way services, such as on-demand video services or “over-the-top” (“OTT”) video distribution (e.g., Netflix). The growth of on-demand and OTT distribution 20 Table of Contents has had a negative impact on the demand for the services of Telesat’s large DTH customers, which has decreased, and is expected to continue to decrease, demand for Telesat’s broadcast satellite capacity. Moreover, two of Telesat’s largest DTH customers also have substantial terrestrial broadcast distribution networks that they are continuing to expand, which has led to certain of their own DTH customers migrating to their terrestrial networks. The migration of DTH customers to terrestrial networks, in order to access improved two-way services or for other reasons, is expected to continue to decrease the demand for Telesat’s services, adversely impacting future revenue and financial performance. Changes or developments with respect to domestic and international customs, tariffs, and trade policies and the corresponding or retaliatory actions by other countries and related uncertainties may adversely affect Telesat’s performance Significant changes or developments with respect to domestic and international customs, tariffs, and trade policies in the territories and countries where Telesat operates, any corresponding or retaliatory actions taken, and related uncertainties could have an adverse effect on the financial results and profitability of Telesat. The U.S. administration has imposed tariffs on imports from Canada and most other countries. The international trade disputes sparked by the tariffs imposed by the U.S. and any other future actions taken by the U.S. and other countries in response, including a further escalation in tariffs, and/or the withdrawal from, or changes to, international trade agreements or policies related to international commerce, have had, and are expected to continue to have, a negative impact on the Canadian economy and other markets where Telesat operates, and could adversely affect Telesat’s business operations and financial condition, including increasing the costs of procuring goods and services by Telesat and it suppliers, in particular goods and services related to the deployment of the Telesat Lightspeed constellation or even the availability of such goods and services. These disputes could also limit Telesat’s ability to sell its services in markets outside Canada or increase the costs of Telesat’s services to its prospective customers, which may make it more difficult or impossible for it to compete with services offered by its competitors in some markets. In addition, the uncertainty as to whether additional tariffs, trade policies or trade restrictions will be adopted domestically or internationally and the uncertainty of the impact of such tariffs and trade policies have and may continue to have a negative impact on the Canadian and global economy and may adversely affect Telesat’s business operations and financial condition. Reductions in government spending could reduce demand for Telesat’s services and Telesat may not receive the expected benefits of its announced strategic partnership with the GoC and MDA. Governments purchase a substantial amount of satellite services from commercial satellite operators, including Telesat. Spending authorizations for defense-related and other programs by governments, in particular the Canadian and U.S. governments, have fluctuated in the past, and future levels of expenditures and authorizations for these programs may decrease, remain constant or shift to programs in areas where Telesat does not provide services. To the extent governments and their agencies reduce spending on commercial satellite services, this could adversely affect Telesat’s revenue and operating margins. Many governments provide funding for satellite services that are used to provide broadband connectivity to rural and remote communities and those with limited terrestrial infrastructure. To the extent these governments reduce spending on satellite services, as a result of the need to reduce overall spending during periods of fiscal restraint, to reduce budget deficits or otherwise, demand for Telesat’s services could decrease, which could adversely affect revenue, the prices it is able to charge for its services and results of operations, business prospects and financial condition. Changes in governments and government priorities could negatively impact Telesat’s business. To the extent existing or newly elected governments were to implement policies or practices that require or favor the acquisition of satellite services from domestic suppliers, Telesat’s revenue from outside Canada could be adversely impacted. While Telesat announced a strategic partnership agreement among the GoC, Telesat Corporation and MDA Space in December 2025 to develop and deliver a multi-frequency, Arctic military satellite communications (MILSATCOM) capability to the Canadian Armed Forces which represents a multi-billion-dollar investment by Canada, definitive agreements regarding the partnership have not been executed. Accordingly, it remains uncertain what role Telesat will play in the delivery of the capability and what benefits, if any, it may receive. 21 Table of Contents Telesat’s failure to maintain or obtain authorizations under and comply with the U.S. export control and trade sanctions laws and regulations could have a material adverse effect on results of operations, business prospects and financial condition. The export of satellites and technical data related to satellites, earth station equipment and provision of services are subject to U.S. export control and economic sanctions laws, implemented by U.S. State Department, Department of Commerce and Department of the Treasury regulations. If Telesat does not maintain its existing authorizations or obtain necessary future authorizations under the export control laws and regulations of the U.S., it may be unable to export technical data or equipment to non-U.S. persons and companies, including to its own non-U.S. employees, as required to fulfil existing contracts. If it does not maintain its existing authorizations or obtain necessary future authorizations under the trade sanctions laws and regulations of the U.S., it may not be able to provide satellite capacity and related administrative services to certain countries subject to U.S. sanctions. Telesat’s ability to acquire new U.S.-manufactured satellites, procure launch services and launch new satellites, operate existing satellites, obtain insurance and pursue its rights under insurance policies or conduct its satellite-related operations and consulting activities could also be negatively affected if Telesat and its suppliers are not able to obtain and maintain required U.S. approvals or authorizations. The content of third-party transmissions over Telesat satellites could subject Telesat to sanctions by various governmental entities for the transmission of certain content. Telesat provides satellite capacity for transmissions by third parties. Telesat does not decide what content is transmitted over its satellites, although its contracts generally provide Telesat with rights to prohibit certain types of content or to cease transmission or permit it to require its customers to cease their transmissions under certain circumstances. A governmental body or other entity may object to some of the content carried over Telesat’s satellites, such as “adult services” video channels or content deemed political in nature. Issues arising from the content of transmissions by these third parties over Telesat’s satellites could affect its future revenues, operations or its relationship with certain governments or customers. Fluctuations in available satellite capacity could adversely affect Telesat’s results. The availability of satellite capacity has fluctuated over time, characterized by periods of undersupply of capacity, followed by periods of substantial new satellite construction which is, in turn, followed by an oversupply of available capacity. The industry appears to be currently experiencing a period of oversupply. Given the number of new satellites launched over the past several years, many of which contain high throughput payloads, as well as the number of satellite constellations being deployed and under development, if the demand for satellite capacity does not increase as expected, the next several years are likely to continue to be characterized by an oversupply of capacity. In addition, changes in technology could introduce a substantial amount of new capacity into the market, further exacerbating the oversupply problem. An oversupply of capacity leads to a decrease in rates charged for satellite services, which could adversely affect Telesat’s results of operations and cash flows. Developments that Telesat expects to support the growth in demand for satellite services, such as continued growth in corporate data and internet traffic, government defense and security requirements, and low earth orbit constellations expanding the total addressable market, may fail to materialize or may not occur in the manner or to the extent anticipated. Telesat is subject to risks associated with doing business internationally. Telesat’s operations internationally are subject to risks that are inherent in conducting business globally. It is subject to compliance with the U.S. Foreign Corrupt Practices Act (“FCPA”) and other similar anti-corruption laws, which generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business. While its employees and contractors are required to comply with these laws, Telesat cannot be sure that its internal policies and procedures will always protect it from violations of these laws, despite its commitment to legal compliance and corporate ethics. Violations of these laws may result in severe criminal and civil sanctions as well as other penalties and enforcement actions. The occurrence or allegation of these types of risks may adversely affect Telesat’s business, performance, financial condition, and results of operations. 22 Table of Contents Interruption or failure of, or cyber-attacks on, Telesat information technology and communication systems, data breaches, data theft, unauthorized access or hacking could materially harm Telesat’s reputation and ability to operate its business effectively, any of which could harm its business and operating results. Telesat’s success depends, in part, on the secure and uninterrupted performance of Telesat’s information technology and communications systems, which are an integral part of its business. Telesat relies on its information and communications systems, as well as on software applications developed internally and externally, to effectively manage its accounting and financial functions, including maintaining its internal controls, operate its satellites and satellites for third parties, provide consulting services to customers, transmit customer’s proprietary and/or confidential content and assist with other operations, among other things. An increasing number of companies have disclosed breaches of their security, some of which have involved sophisticated and highly targeted attacks on their computer networks. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems, change frequently and often are not recognized until launched against a target, Telesat may be unable to anticipate these techniques or to implement adequate preventative measures. If unauthorized parties gain access to Telesat’s information technology systems, they may be able to misappropriate assets, including confidential trade secrets and intellectual property assets, which could be used to compete against Telesat’s business and otherwise adversely impact its competitive position. They could also access sensitive information (such as personally identifiable information of Telesat’s customers, business partners and employees), cause interruption in Telesat’s operations, corruption of data or computers, or otherwise damage Telesat’s reputation and business. In such circumstances, Telesat could be held liable to its customers or other parties, or be subject to regulatory or other actions for breaching privacy rules. While Telesat continues to bolster its systems with additional security measures and, working with external experts, mitigate the risk of security breaches, its systems may be vulnerable to theft, loss, damage and interruption from a number of potential sources and events, including unauthorized access or security breaches, inclement weather, natural or man-made disasters, earthquakes, explosions, terrorist attacks, floods, fires, cyberattacks, computer viruses, malware, ransomware, phishing attacks, social engineering schemes, domain name spoofing, insider theft, power loss, telecommunications or equipment failures, transportation interruptions, accidents or other disruptive events or attempts to harm its systems. Telesat’s facilities are potentially vulnerable to break-ins, sabotage and intentional acts of vandalism. Its disaster recovery planning cannot account for all eventualities. Telesat’s business and operations could be adversely affected if, as a result of a significant cyber event or otherwise, its operations are disrupted or shutdown, confidential or proprietary information is stolen or disclosed, it loses customers, it incurs costs or is required to pay fines in connection with confidential or export-controlled information that is disclosed, it must dedicate significant resources to system repairs or increase cyber security protection or it otherwise incurs significant litigation or other costs as a result of any such event. A serious disruption to Telesat’s systems could significantly limit its ability to manage and operate its business efficiently, which in turn could have a material adverse effect on its business, reputation, results of operations and financial condition. Furthermore, any compromise of Telesat’s security could result in a loss of confidence in Telesat’s security measures, and subject Telesat to litigation, civil or criminal penalties, and negative publicity that could adversely affect Telesat’s financial condition and results of operations. Pandemics could have a material adverse effect on Telesat’s business, financial condition and results of operations. Telesat’s business and results of operation have been and may in the future be adversely affected by pandemics, and by measures taken to prevent their spread, including restrictions on travel, imposition of quarantines, cancellation of events, remote working, and closure of workplaces and other businesses. Telesat’s business and results of operations may also be negatively impacted by the adverse effect that pandemics have had, and may in the future have, on global economic activity, which may include continued inflation and/or a period of prolonged global or regional economic slowdowns or recessions. Pandemics could also impact Telesat’s ability to attract capital to finance business strategies, such as the expansion of the Telesat Lightspeed constellation and its related network, and also could increase Telesat’s cost of borrowing. 23 Table of Contents Telesat may pursue acquisitions, dispositions and strategic transactions which could result in the incurrence of additional costs, liabilities or expenses in connection with the implementation of such transactions. In the future, Telesat may pursue acquisitions, dispositions and strategic transactions, which may include joint ventures and strategic relations, as well as business combinations or the acquisition or disposition of assets. Acquisitions, dispositions and strategic transactions involve a number of risks, including: potential disruption of ongoing business; distraction of management; may result in Telesat being more leveraged; the anticipated benefits and cost savings of those transactions may not be realized fully or at all or may take longer to realize than expected; increasing the scope and complexity of Telesat operations; and loss or reduction of control over certain of its assets. The presence of one or more material liabilities of an acquired company that are unknown to Telesat at the time of acquisition could have a material adverse effect on its results of operations, business prospects and financial condition. A strategic transaction may result in a significant change in the nature of its business, operations and strategy. In addition, it may encounter unforeseen obstacles or costs in implementing a strategic transaction. Telesat continues to evaluate the performance of all of its businesses and may sell businesses or assets. Such a sale could include a strategic disposition of one or more of its satellites. In addition to the risks listed above that may occur with any acquisition, disposition or strategic transaction, a satellite divestiture could result in a loss of revenues or significant write-offs, including those related to goodwill and other intangible assets, which could have a material adverse effect on its financial condition, results of operations and cash flows. There can be no assurance that Telesat will be successful in addressing these or any other significant risks encountered. Telesat could experience the departure of key employees or may be unable to recruit the employees needed for its success. Telesat relies on a number of key employees, including members of management and certain other employees possessing unique experience in technical and commercial aspects of the satellite services business. If it is unable to retain these employees, it could be difficult to replace them. In addition, Telesat’s business, with its constant technological developments, must continue to attract highly qualified and technically skilled employees. In the future, if Telesat were unable to retain or replace its key employees, or if it were unable to attract new highly qualified employees, it could have a material adverse effect on results of operations, business prospects and financial condition. Telesat’s future reported net income and asset values could be adversely affected by impairments of the value of goodwill and intangible assets. Telesat’s consolidated balance sheet as at December 31, 2025 includes goodwill with a carrying value of approximately $2,214.6 million (allocated $214.6 million and $2,000.0 million, respectively, between GEO and LEO as at December 31, 2025 and other intangible assets with a carrying value of approximately $442.3 million (the most significant assets being orbital slots with a carrying value of approximately $311.0 million as at December 31, 2025). Goodwill and other intangible assets are qualitatively assessed for indicators of impairment. If the qualitative assessment concludes an indication of impairment, a quantitative impairment test of goodwill and other intangible assets with indefinite useful lives is undertaken. Telesat measures for the quantitative impairment test using a projected discounted cash flow method and confirms the assessment using other valuation methods. If the asset’s carrying value is more than its recoverable amount, the difference is recorded as a reduction in the amount of the asset on the balance sheet and an impairment charge in the statement of income. Quantitative testing for impairment requires significant judgment by management to determine the assumptions used in the impairment analysis. Any changes in the assumptions used could have a material impact on the impairment analysis and result in an impairment charge. Telesat cannot predict whether an event that triggers impairment will occur, when it will occur or how it will affect the reported asset values. A substantial amount of Telesat’s goodwill and intangible asset value is supported by the Telesat Lightspeed constellation which has not yet been deployed. If it were determined that the Telesat Lightspeed constellation program was unlikely to proceed as planned, it is likely that Telesat’s goodwill and intangible assets would be deemed to be impaired. If Telesat’s goodwill or other intangible assets are deemed to be impaired in whole or in part, it could be required to reduce or write-off such assets, which could have a material adverse effect on its financial condition. 24 Table of Contents Significant changes in exchange rates could have a material adverse effect on financial results. Telesat’s main foreign currency exposures as of December 31, 2025, lie in its U.S. dollar denominated debt financing and cash and cash equivalents. Approximately 47.1% of revenue, 51.6% of operating expenses, 100% of interest expense on the Telesat Canada Debt and the majority of Telesat Lightspeed capital expenditures were denominated in U.S. dollars for the year ended December 31, 2025. See Management Discussion and Analysis section for detailed foreign exchange sensitivity analysis. As at December 31, 2025, the Telesat Canada Debt, excluding deferred financing costs, loss on repayment and prepayment options was US$2,145.6 million. Changes in exchange rates impact the amount that Telesat pays in interest, and may significantly increase the amount that it is required to pay in Canadian dollar terms to redeem its 2027 Senior Secured Notes, 2026 Senior Secured Notes or 2027 Senior Unsecured Notes, either at maturity, or earlier if redemption rights are exercised or other events occur which require it to offer to purchase its 2027 Senior Secured Notes, 2026 Senior Secured Notes or 2027 Senior Unsecured Notes prior to maturity, and to repay funds drawn under the Senior Secured Credit Facilities. A portion of Telesat revenues comes from contracts which are denominated in Brazilian Reais. Any decrease in the value of the Brazilian Reais against the Canadian dollar would reduce revenues. Borrowings under the Telesat Lightspeed Financing are in Canadian dollars. However, in excess of 80% of Telesat’s expected capital investments in the Telesat Lightspeed program over the next two years are expected to be in currencies other than Canadian dollars, primarily U.S. dollars and Euros. Any decrease in the value of the Canadian dollar against the U.S. dollar or Euro will increase the Canadian dollar costs of the program, and Telesat may be required to raise additional funding to complete the program, which funding Telesat may not be able to raise or, even if Telesat is successful in raising additional funding, could adversely impact the business case for Telesat Lightspeed. Given that we expect a significant amount of our future revenue to be in U.S. dollars, an increase in the value of the Canadian dollar as compared to the U.S. dollar could adversely impact the ability Telesat LEO ULC to repay its Canadian dollar debt under the Telesat Lightspeed Financing. Because of the Telesat Canada Reorganization and Divestiture Act, a Canadian act uniquely applicable to Telesat Canada (but not the other entities in the Telesat corporate structure), Telesat’s GEO operating subsidiary may not have access to the usual protections from creditors and other rights available to insolvent persons and creditors, may not have recourse to the usual rights, remedies and protections under applicable bankruptcy and insolvency laws generally available to creditors of insolvent persons. Under the Telesat Canada Reorganization and Divestiture Act (“Telesat Divestiture Act”), Telesat Canada (as a corporate entity) is subject to certain special conditions and restrictions. The Telesat Divestiture Act provides that no legislation relating to the solvency or winding-up of a corporation applies to Telesat Canada and in no case shall Telesat Canada’s affairs be wound up unless authorized by an Act of the Parliament of Canada. As a result of such legislative provisions, Telesat Canada and its creditors may not have recourse to the usual rights, remedies and protections under applicable bankruptcy and insolvency laws, including the imposition of a stay of proceedings, or a regulated and orderly process to settle or compromise claims and make distributions to creditors, or recourse to fraudulent preference, transfer at undervalue or fraudulent conveyance laws, in Canada. The effect of the Telesat Divestiture Act upon Telesat Canada’s insolvency has not been considered by a Canadian court and, accordingly, the application of Canadian federal bankruptcy and insolvency laws and provincial receivership and fraudulent conveyance and assignment and preference laws, and the exercise by a Canadian court of any judicial discretion which could affect the enforcement of rights and remedies or other equitable relief against Telesat Canada in the context of an insolvency, is uncertain. To the extent bankruptcy and insolvency laws in Canada do not apply to Telesat Canada, its creditors may individually seek to pursue any available rights or remedies, as secured or unsecured creditors as the case may be, against Telesat Canada and its assets. Only Telesat Canada’s assets (including the shares in its subsidiaries) are subject to the Telesat Divestiture Act, but the assets of the other entities within the Telesat corporate structure, including the guarantors of the Telesat Canada Debt, are not. These restrictions may have a material impact on the sale of Telesat Canada or its assets in any bankruptcy or reorganization scenario and on any proceeding to realize value from Telesat Canada or its assets. 25 Table of Contents Additional risks Relating to the Telesat Lightspeed Constellation There are numerous technological risks and uncertainties associated with the Telesat Lightspeed constellation which may cause it to be unsuccessful and have a material adverse effect on Telesat’s results of operations, business prospects and financial condition. Telesat is currently building an advanced LEO satellite network consisting initially of over one hundred and up to several hundred satellites in NGSO. There are numerous risks and uncertainties associated with NGSO constellations generally and with Telesat’s Lightspeed constellation in particular. NGSO constellations are complex. In order to operate successfully and deliver a high-quality service, all components of the system, both on the ground and in space, must be integrated seamlessly and efficiently. Unlike most traditional GEO satellites currently in use, which rely on legacy, space-tested hardware and established ground equipment infrastructures, some of the technology necessary for the successful operation of a LEO constellation, in particular the Telesat Lightspeed constellation, is still in development. The Telesat Lightspeed constellation design incorporates leading-edge satellite technologies, including on-board data processing, multi-beam phased array antennas and optical inter-satellite links; these are technologies that Telesat has not previously developed or used for space applications at the scale, levels of performance and price points that are required for the successful operation and commercialization of the Telesat Lightspeed constellation. In addition, certain key suppliers are small, new companies that may not be well capitalized and for whom we are their largest customer. If these key suppliers’ businesses were to fail, the Telesat Lightspeed constellation could be materially delayed and/or its cost could materially increase. In order to provide a competitive service in certain of the customer segments Telesat plans to serve, it requires advances in ground terminal design and manufacturing, particularly electronic flat panel antennas capable of acquiring and tracking LEO satellites. If the Telesat Lightspeed constellation does not deliver the required quality of service at prices that are competitive relative to other satellite providers and alternative products, it may not be able to acquire customers and establish a successful business. It is possible that Telesat may not be able to overcome the technological hurdles required to complete the planned Lightspeed constellation, the start of service may be materially delayed, and/or due to technological issues the Telesat Lightspeed constellation may not operate as planned, any of which could have a material adverse effect on results of operations, business prospects and financial condition. The design of the Telesat Lightspeed satellites and network may change, as a result of technical difficulties, to respond to commercial opportunities or for other reasons. Any change could result in increased costs, delay the in-service date of the constellation, or impair or delay regulatory approval to obtain access to certain markets. For example, while Telesat has announced that it is adding Mil-Ka frequencies to the constellation, it requires the approval of the Telesat Lightspeed Financing lenders. While Telesat expects that approval to be forthcoming, there can be no assurance that it will be received in a timely manner or at all. In addition, the adding of the Mil-Ka frequencies can present regulatory challenges (see “Risks Related to Regulatory Matters”). The Telesat Lightspeed constellation may suffer launch failures or its satellites may fail to reach their planned orbital locations. Any such issue could result in the loss of a satellite or cause significant delays in the deployment of the satellite. Delays in launching satellites and in the deployment of satellites are not uncommon and result from construction delays, the unavailability of reliable launch opportunities with suppliers, delays in obtaining required regulatory approvals, launch failures and launch vehicle underperformance (in which case the satellite may be lost or, if it can be placed into service by using its onboard propulsion systems to reach the desired orbit, will have a shorter useful life). There is no guarantee that Telesat will be able to fully draw the committed funding under the Telesat Lightspeed Financing. On September 13, 2024, Telesat announced that it had completed securing the Telesat Lightspeed Financing. See “Business — Our GEO Business and Our LEO Opportunity — Overview of Telesat Lightspeed”. Telesat’s ability to draw the full amount of this funding is dependent on continuing to comply with various covenants and other obligations as well as reaching certain milestones in the Telesat Lightspeed development and production process, which, for various reasons, may not occur. 26 Table of Contents The exercise of the Telesat Lightspeed Financing Warrants granted in connection the Telesat Lightspeed Financing would be dilutive, and the Telesat Lightspeed Financing Warrants contain embedded derivatives which could adversely impact Telesat’s financial results. In connection with the loans from the GoC and GoQ for Telesat Lightspeed, Telesat has granted warrants to purchase a number of the limited partnership units of Lightspeed LEO Limited Partnership, a limited partnership which holds all of the shares of Telesat LEO ULC. Telesat’s indirect, wholly-owned subsidiary that owns and will operate and commercialize the Lightspeed constellation. Any exercise of such warrants would result in dilution of the interest of the shareholders of Telesat in the Telesat Lightspeed business. In addition, these warrants contain embedded derivatives, which can introduce additional complexities and risks. These embedded derivatives are subject to market fluctuations, interest rate changes, and other economic variables that can significantly impact their value. The valuation and accounting for these instruments require sophisticated models and assumptions, which may not always accurately predict future outcomes. The impact of misestimations or changes in market conditions relating to the valuation and accounting for these instruments could adversely affect Telesat’s financial position and results of operations. The Telesat Lightspeed constellation will require Telesat to develop significant commercial and service operational capabilities. Failure to effectively develop such operational capabilities could cause the Telesat Lightspeed constellation to fail to achieve commercial viability and could have a material adverse effect on Telesat’s operations, business prospects and financial condition. The Telesat Lightspeed constellation will offer an end-to-end data service such that Telesat will be responsible for system performance from the Point of Presence (where the constellation connects to either a customer’s private network or to the terrestrial internet) through the Telesat Lightspeed network to the end-user’s terminal. This contrasts with Telesat’s current GEO satellite services, from which Telesat currently derives a majority of its revenue, where Telesat primarily provides customers with access to its GEO satellites, and customers then combine this capacity with ground (hub) equipment to create a connectivity service. Telesat’s failure to develop new supporting technologies, processes and procedures, competencies, and other capabilities to support the Lightspeed constellation may materially impact its ability to commercialize the Telesat Lightspeed constellation. Additionally, Telesat’s Lightspeed constellation will require an advanced ecosystem to support LEO service installation and provisioning, including user terminals and related installs, which we currently do not possess at the scale that will be required. Telesat’s effective monetization of the Telesat Lightspeed constellation may require Telesat to provide ancillary services to combine with Telesat’s LEO services, as customers may demand these services to create a complete solution for their communications requirements. Some examples of ancillary services are trained third parties who can install and maintain Telesat’s LEO terminals. Telesat does not currently have these capabilities, and may be required either to develop such capabilities in house or partner with third parties to deliver these capabilities, and Telesat cannot assure you that it will be able to successfully establish such capabilities. A material part of Telesat’s anticipated revenues from the Telesat Lightspeed constellation are expected to come from geographies where Telesat does not have a significant presence today, including Europe, Africa and Asia, and the expansion of Telesat’s capabilities in other geographies where it currently has operations. Telesat’s failure to expand its sales and distribution capabilities in these geographies could cause the Lightspeed constellation to fail to achieve commercial viability. In order to effectively operate the Telesat Lightspeed constellation, Telesat will be required to develop and expand certain business operations capabilities, including management of inventory, tracking service installation and commissioning, network monitoring and customer call resolution. Telesat also will need to develop new network capabilities to provision terminals, manage bandwidth and monitor these services. If Telesat is unable to develop these capabilities, it may be unable to provide customers with a level of service sufficient to support the Telesat Lightspeed constellation’s adoption. Even if Telesat is able to successfully build and deploy the Telesat Lightspeed constellation, Telesat may nonetheless fail to generate anticipated revenues due to slow market adoption or because the total addressable market for the Telesat Lightspeed constellation may be smaller than Telesat expects. Telesat’s projected revenues from its Telesat Lightspeed constellation are based on the anticipated expansion of the market for satellite services, which assumes that the availability of higher quality, lower priced services will lead to increased uses of satellite services. However, there may be factors, both internal to and extraneous to Telesat’s development and deployment of its Telesat Lightspeed network, that slow market adoption of and cause Telesat Lightspeed’s revenues to be lower than anticipated. Telesat Lightspeed ground terminal antennas require a much greater field of view than GEO 27 Table of Contents antennas because LEO satellites are in constant motion from the perspective of the earth. This may mean that Telesat Lightspeed antennas are more difficult to install than anticipated, which could limit the adoption of Telesat Lightspeed. If we are unable to deploy a sufficient number of satellites needed to communicate with standard flat panel antennas, which require an even greater field of view than traditional ground terminal antennas, it may increase the costs of the antennas required to communicate with our satellites, which could increase our costs or adversely impact the addressable market for our services. We will operate the Telesat Lightspeed constellation using Ka-band frequencies while some of our competitors are using, or intend to use, Ku-band frequencies which are less susceptible to service outages during heavy rains. An increased level and frequency of outages at Ka-band may negatively impact the size of the market for the Telesat Lightspeed services. Additionally, given that Telesat Lightspeed relies on new technology, potential customers may not be willing to purchase its services until Telesat Lightspeed has been successfully deployed and in operation which could delay or decrease demand for its services. If sufficient terminals are not installed prior to the commencement of global service, it could lead to a failure to achieve anticipated revenues on a timeline that supports the Telesat Lightspeed constellation’s commercial viability. Moreover, certain users, particularly governments, may have requirements, including security requirements, that Telesat is unable to meet, leading to lack of access to important markets. Telesat’s business plan for the Telesat Lightspeed constellation is based on its own analysis of the total addressable market (“TAM”) for the constellation’s services. It is possible that Telesat’s analysis of the TAM for the Telesat Lightspeed constellation is inaccurate and the TAM could be materially smaller than Telesat’s analysis suggests. Even if Telesat’s analysis of the TAM for Telesat Lightspeed is accurate, those services may end up being provided by Telesat’s competitors, some of whom are larger, have greater access to capital and have deployed or will deploy their constellations before Telesat. Although Telesat believes there is a significant market for the services it expects to provide with the Telesat Lightspeed constellation, it may not be able to attract enough customers to make the project successful and earn a sufficient return on investment or support its indebtedness, which could have a material adverse effect on its business prospects and financial condition. Telesat faces robust competition to its Telesat Lightspeed constellation, and/or the pursuit of a LEO constellation may negatively impact Telesat’s existing business. The Telesat Lightspeed constellation will compete with NGSO satellite projects announced and/or in operation by other companies, including Eutelsat Group/OneWeb, SpaceX, SES/O3b, Amazon, Blue Origin’s TeraWave, as well as country and region-sponsored projects, including in China, Russia and Europe. Some of these potential competitors to Telesat’s system have greater access to capital than Telesat has and/or are at a more advanced stage of development. For example, China and Russia have access to larger amounts of capital and have government-owned satellite manufacturing and launch facilities at their disposal. SpaceX and Amazon are much larger than Telesat, have more diverse sources of revenue, and substantially greater financial resources than Telesat. SpaceX has also already deployed, and Amazon is in the process of deploying significantly greater numbers of satellites, and at lower orbits, than will be deployed in the Telesat LightSpeed constellation. The deployment of a greater number of satellites and at lower orbits may provide Telesat’s competitors with advantages, including being able to implement smaller and cheaper antennas than may be required by Telesat Lightspeed. The Eutelsat Group/OneWeb and SpaceX constellations have already commenced operations, which may make it more difficult for Telesat to attract customers for its constellation once it is deployed. SpaceX in particular has made meaningful inroads in the commercial aero and maritime markets. Further, to the extent any of the other constellations make use of Ka-band spectrum, as SpaceX, Amazon and Eutelsat Group/OneWeb do, it may limit Telesat’s access to sufficient Ka-band spectrum to operate the Lightspeed constellation efficiently and profitably. See “Risks Relating to Regulatory Matters.” Telesat also competes with Eutelsat Group/OneWeb, SpaceX, Amazon and other developers of NGSO satellite projects for human capital, and Telesat may fail to recruit and retain a workforce capable of developing and deploying the Telesat Lightspeed constellation, which may cause Telesat to fail to successfully commercialize the constellation. Some of Telesat’s competitors have greater access to launch capabilities than Telesat. SpaceX has its own in-house launch capability and Blue Origin, a company owned by Amazon’s Executive Chair and largest shareholder, Jeff Bezos, is significantly advanced in its development of launch vehicles. Each of Amazon’s and SpaceX’s greater access to launch vehicles for its own satellites may give it an advantage over Telesat since Telesat does not have in-house capability to launch its own satellites. In addition, SpaceX and Amazon manufacture their own satellites and user terminals, which may provide them with advantages over us since we are reliant on third parties for the supply of our Telesat Lightspeed satellites and user terminals. 28 Table of Contents If successfully implemented, the Telesat Lightspeed constellation may decrease demand for Telesat’s other satellite services. See “— Changes in technology could have a material adverse effect on Telesat’s results of operations, business prospects and financial condition.” Risks Relating to Regulatory Matters Telesat operates in a highly regulated industry and is required to comply with multiple, potentially conflicting, laws and regulations and obtain numerous governmental authorizations and approvals. If Telesat becomes subject to onerous regulations, or if it fails to obtain or maintain particular authorizations on acceptable terms, such regulatory obligations and/or such failure could delay or prevent it from offering some or all of its services and adversely affect its results of operations, business prospects and financial condition. Authorizations required to operate satellites Telesat operates satellites with frequency rights authorized by Canada, the U.S., Brazil, the U.K. and Tonga. The frequency rights are underpinned by ITU filings, technical documents that the operator, via the administration, submits to and maintains at the ITU. Canada, the U.S. and Brazil also issue associated licenses or grants with conditions as discussed below. In addition, most countries regulate transmission of signals to and from their territory, and Telesat is required to obtain and maintain authorizations to carry on business in the countries in which it operates. In particular, Telesat requires authorization (sometimes referred to as “landing rights” or as “market access”) for the space segment portion of its services in some countries around the world, while in other countries there is no formal authorization requirement (often referred to as “Open Skies”). Therefore, Telesat is subject to regulation by government authorities in Canada, the U.S. and Brazil, as well as by other governmental authorities in certain other countries in which it operates. The applicable domestic regulations may depend on whether the frequencies are reserved for commercial or military/government use. Telesat Lightspeed satellites carry frequencies in the “Commercial-Ka” and in the “Mil-Ka.” What is referred to as “Mil-Ka” (sometimes referred to as “Government-Ka”) are frequency bands immediately adjacent to what is referred to as “Commercial-Ka.” At the international (ITU) level the Mil-Ka and Commercial-Ka bands (for which there are no formal definitions) are similarly allocated to satellite services; however, at the domestic level, some administrations have limited the Mil-Ka bands to government/military use only (for example, Mil-Ka is a harmonized NATO band for defense/governmental purposes). As a result, for these administrations to access the Mil-Ka frequencies additional approvals would be required, but the exact process and nature of those approvals are not well established because of the limited use of these frequencies by commercial operators in the past. In terms of licensing by Canada, the ITU filings for the Mil-Ka would belong to ISED Canada and Telesat would need an agreement with ISED Canada, to access these filings. If these agreements cannot be reached, Telesat Lightspeed’s operations may be adversely affected. In Canada, operations are subject to regulation and licensing by Innovation, Science and Economic Development Canada (“ISED”) pursuant to the Radiocommunication Act (Canada), and by the Canadian Radio-television and Telecommunications Commission (“CRTC”) under the Telecommunications Act (Canada). Certain of Telesat’s satellites operate under spectrum authorizations issued by ISED, including the GEO Anik satellites F1R, F2, F3 and G1, the GEO Nimiq satellites 2, 4, 5 and 6, and the NGSO Telesat Lightspeed constellation. ISED also has the authority to establish policies and standards upon which Telesat’s satellites depend. The Minister of ISED has broad discretion in exercising this authority to issue licenses, establish and amend conditions of licenses, and to suspend or even revoke them. The CRTC implements the broadcasting policy for Canada and can direct the allocation of satellite capacity to particular broadcasting undertakings. Telesat is required to pay “universal service” charges in Canada and has certain research and development and public benefits obligations that do not apply to other satellite operators with which it competes. These obligations could change at any time. With respect to landing rights, ISED maintains a list of foreign satellites approved to provide Fixed Satellite Service (“FSS”) in Canada. Telesat’s Telstar 11N, Telstar 12 VANTAGE, Telstar 14R/Estrela do Sul 2 and Telstar 19 VANTAGE satellites are currently authorized to serve the Canadian market in accordance with these procedures. Telesat was granted a spectrum authorization on December 6, 2024, for Commercial-Ka bands. Telesat is also seeking access to the Mil-Ka frequencies, which are not included in that authorization. Telesat’s current deployment plan would meet the milestone obligations of the existing and any new authorization; however, there is no assurance this will be the case. 29 Table of Contents In the U.S., the Federal Communications Commission (“FCC”) regulates the provision of satellite services to, from or within the U.S. Certain of Telesat’s satellites are owned and operated through a U.S. subsidiary and are licensed by the FCC. This includes Telstar 11N and Telstar 12 VANTAGE. With respect to landing rights, operators can apply to have their satellites either placed on the FCC’s Permitted Space Station List (for certain frequencies) or be granted a declaratory ruling (for other frequencies). Telesat’s, Anik F1R, Anik F2, Anik F3, Anik F4, Telstar 14R/Estrela do Sul 2 and Telstar 19 VANTAGE satellites are currently authorized to serve the U.S. market in accordance with these procedures, and some of the frequencies on Telstar 18 VANTAGE have access to the U.S. market through an earth station authorization. With respect to the Commercial-Ka frequencies used by the Telesat Lightspeed constellation, Telesat was granted U.S. market access on November 3, 2017. If Telesat seeks access to Mil-Ka frequencies, which are not included in that grant, additional U.S. government approvals would be required, but the exact nature and number of those approvals are not well established because there has been limited use of these frequencies by commercial operators in the past. The parameters of Telesat’s current Ka-band Telesat Lightspeed constellation design differ from the parameters of the market access grant from the U.S., which grant was for 117 satellites, and the market access grant from the U.S. is subject to post-grant conditions, including a requirement for providing an updated showing on orbital debris mitigation based on final system design. Telesat has applied in the FCC’s second processing round for Ka-band systems, to modify its U.S. market access grant to match the parameters of the Telesat Lightspeed constellation design at the time, including an increase in the number of authorized satellites, and has subsequently filed for further amendments. In general, satellites authorized in a later processing round must protect satellites authorized in a previous processing round from interference. There is no assurance that Telesat’s application will be approved or, if approved, that it will not have conditions that preclude Telesat from being able to deliver an acceptable level of service in the U.S. There is also no assurance that the updated showing on orbital debris mitigation for the current design will be approved. In addition, Telesat’s U.S. first round market access grant for Telesat Lightspeed has deployment milestones that require a certain percentage of the authorized satellites to be in service by a specific date. See “Business — Regulation — United States Regulatory Environment.” As Telesat could not meet its first deployment milestone, on October 26, 2023 Telesat submitted a milestone extension request. If an extension is not granted, Telesat will lose its first processing round U.S. market access grant either entirely or as to any number of satellites above the number for which the extension is granted. If Telesat were to lose its first processing round grant and if Telesat is not granted access to the U.S. market under a second processing round application, Telesat could be prevented from offering its services in the United States, which could adversely affect results of operations, business prospects and financial condition. In Brazil, the national telecommunications agency, ANATEL, regulates the granting of landing rights (referred to as “exploitation rights”) to the operation of Brazilian and foreign satellites and their use to transport telecommunication signals. Two of Telesat’s satellites (Telstar 14R/Estrela do Sul 2 and Telstar 19 VANTAGE) are operated through a Brazilian subsidiary and are regulated by ANATEL pursuant to Concession Agreements. With respect to market access, ANATEL has also accredited the provision of service by foreign operators. Telesat’s Telstar 12 VANTAGE satellite, Anik G1 satellite and the Telesat Lightspeed constellation, are currently authorized to serve the Brazil market in accordance with these procedures. The parameters and in-service date of Telesat’s current Ka-band Telesat Lightspeed constellation design differ from the parameters of the previous authorization from ANATEL. Telesat has provided a technical update to ANATEL along with a request to extend the deadline for entry into operation of the Telesat Lightspeed constellation. ANATEL assigned new exploitation rights for Telesat Lightspeed on June 17, 2024. There is no assurance Telesat will meet the maximum period for Telesat Lightspeed to enter into operation. Telstar 18 VANTAGE operates at the 138° EL orbital location under agreements with APT Satellite Company Limited (“APT”), which has been granted the right to use frequencies at the 138° EL orbital location by The Kingdom of Tonga. The ViaSat-1 satellite at the 115° WL orbital location, which has been granted the right to use frequencies at the 115° WL orbital location by the United Kingdom regulatory agency, OFCOM, includes a payload that Telesat owns and operates. The rights to use certain frequencies on Telstar 12 VANTAGE, Telstar 18 VANTAGE and Telstar 19 VANTAGE have also been granted by OFCOM. 30 Table of Contents Coordination with other GSO networks/NGSO systems While some regulators impose successful coordination with domestic operators as a condition for market access by foreign satellite operators, other jurisdictions such as, for example, the U.S. and Brazil, have adopted different approaches. In addition, with respect to the Mil-Ka frequencies additional approvals would be required, but the exact process and nature of those approvals are not well established because of the limited use of these frequencies by commercial operators in the past. A ruling by Brazil effective November 1, 2021 gives domestic, or “national priority” status to foreign satellite operators based on date of receipt of a landing rights request. In relation to Telesat Lightspeed, Telesat will need to operate on a non-interference/non-protection basis with respect to NGSO networks with earlier applications for landing rights, which may lead to some restrictions on operations. Telesat will also be required to coordinate with GSO operators that have sought landing rights in Brazil at an earlier date than Telesat did in order to use part of the spectrum Telesat Lightspeed is capable of operating in. This could lead to some restrictions in the available capacity. The U.S. rules, which are agnostic to domestic versus foreign, require systems authorized in subsequent processing rounds to protect systems authorized in previous processing rounds. The FCC adopted specific degraded throughput methodology criteria that NGSO FSS systems licensed in a later processing round must include in compatibility analyses, in absence of a coordination agreement, to demonstrate that they can operate compatibly with and protect NGSO FSS systems authorized in earlier processing rounds that came into force on January 12, 2025 (with certain provisions delayed until July 31, 2025). There is no guarantee that Telesat will be able to demonstrate compliance with these criteria, or that other operators, when applying these criteria, will not cause interference to Telesat. It is possible that some jurisdictions may adopt the U.S. or the Brazilian approach, or some other alternative approach. In other jurisdictions, incomplete coordination with domestic GSO networks/NGSO systems may prevent access to some or all of the spectrum in which Telesat Lightspeed is capable of operating. Potential impacts of failure to obtain or maintain authorizations and approvals In addition to the authorization for the space segment required in some countries, authorizations/licenses are typically needed also for service provision and/or the ground segment portion of the services, in order for services to be provided to customers and user terminals/gateways to operate in a given frequency range. Furthermore, user terminals need type approval in some countries. Seeking authorization for Mil-Ka frequencies will require agreement with government agencies in countries where such frequencies are allocated for government use, but the exact process and nature of those agreements are not well established because of the limited use of these frequencies by commercial operators in the past. If Telesat and/or its partners fail to obtain or maintain specific authorizations on acceptable terms, such failure could delay or prevent it from offering some or all of its services and adversely affect results of operations, business prospects and financial condition. In particular, Telesat may not be able to obtain all the required regulatory authorizations for the construction, launch and operation of any of its future satellites, for the spectrum for these satellites and for its ground infrastructure, on acceptable terms or at all. Even if the necessary authorizations were obtained, they may impose significant operational restrictions, or not provide adequate protection from interference that could affect the use of the satellites, user terminals and gateways of the Telesat Lightspeed system. Countries or their respective regulatory authorities may adopt new laws, policies or regulations, or change their interpretation of existing laws, policies or regulations, that could cause Telesat’s existing authorizations to be changed or cancelled, require it to incur additional costs, impose or change existing pricing, or otherwise adversely affect operations or revenues. As a result, any currently held regulatory authorizations are subject to rescission and renewal and may not remain sufficient or additional authorizations may be necessary that it may not be able to obtain on a timely basis or on terms that are not unduly costly or burdensome. Further, because the regulatory schemes vary by country, Telesat may be subject to regulations in foreign countries of which it is not presently aware that it is not in compliance with, and, as a result, could be subject to sanctions by a foreign government. Other potential regulatory impacts Some of the spectrum utilized by the Telesat Lightspeed constellation is also allocated to other services, including terrestrial fixed and mobile services, or is limited, by domestic allocation, to government use. In a number of countries, regulators are considering and may adopt new spectrum allocations for terrestrial mobile broadband and 5G, including in bands that are currently allocated to satellite services. While some jurisdictions have established rules for sharing the spectrum, many jurisdictions have yet to address this issue. New spectrum allocations may require satellite operators to vacate or share spectrum and may limit the spectrum that is available for satellite services, which could adversely impact Telesat’s business. 31 Table of Contents There are certain risks that have been raised in connection with the deployment of LEO constellations, including ensuring equitable access to orbit and associated spectrum resources, the potential for increased orbital debris following impact with other small and large orbiting objects, “light pollution” associated with light reflecting off satellites in the night sky, the potential of increased risks to cause human casualty following uncontrolled satellite re-entry into the atmosphere, the potential of causing irreversible damage to the earth atmosphere (including its ozone layer) following the demise of large quantities of metals and other materials that LEO satellites are usually composed of and potential regulatory measures for protecting certain Radio-Astronomy sites worldwide that carry out observations in spectrum used by the Telesat Lightspeed satellites. In a number of countries and regions, regulators are considering and may adopt regulations to ensure the sustainable use of orbit and spectrum resources by satellites. Certain of these guidelines, laws and regulations address risks related to generating orbital debris, among other topics. Because of the altitude of the orbits used by Telesat Lightspeed, a failed Telesat Lightspeed satellite will take longer to de-orbit and re-enter the Earth’s atmosphere through natural atmospheric drag, than those of our competitors who have deployed, or will be deploying, their satellites in lower altitude orbits. The increased de-orbit time of the Telesat Lightspeed satellites could make it harder to comply with any new orbital debris regulations that may be developed at national, regional or international levels. To the extent that governments impose restrictions or additional regulations to address any of these concerns regarding LEO constellations, these may adversely impact Telesat’s ability to successfully deploy the Telesat Lightspeed constellation. Based on the designed concept of operations, the satellites composing the Telesat Lightspeed system will be launched into a low LEO orbit (at an altitude of around 400 km) to be tested before being raised to their operational orbit (at an altitude of around 1,300 km). Similarly, at the end of their mission, the same satellites will be actively de-orbited from their operational orbit to a low LEO orbit (again, at an altitude of around 400 km), before being passivated and let re-enter the Earth’s atmosphere for demise. The planned orbit raising and orbit descent phases are designed to last around six months each. During those phases, the Telesat Lightspeed satellites will cross the orbits of many other satellites and Telesat will make all reasonable efforts to avoid colliding with them. The absence of internationally-agreed procedures and/or “rules of the road” determining which satellite needs to maneuver to avoid possible collisions, public repositories of owners/operators’ contact details, and the absence of certain satellites from public repositories listing space objects, means that Telesat cannot guarantee that the Telesat Lightspeed satellites will not collide with any space object operated by a third-party. A collision involving a Telesat Lightspeed satellite could adversely impact Telesat’s business. Certain countries condition market access on an operator’s ability to satisfy those countries’ “lawful intercept” laws (lawful interception is a security process that allows law enforcement agencies to electronically monitor communications through telephone networks or telecommunications facilities with court orders or other legal authorization and requires a network operator/service provider to collect and provide the law enforcement agencies with the intercepted communications of private individuals or organizations). The specifics of lawful intercept laws, and hence the requirements on a network operator/service provider to comply, vary country by country and can involve discussions/negotiations with the relevant authorities. Satisfying lawful intercept requirements can impose costs, delays and network performance impacts. Recently, some countries that currently do not impose such requirements on satellite telecommunications have started to consider imposing them. An increase in the number of countries imposing these requirements could increase the adverse impacts from them on the Telesat Lightspeed system. Rapidly evolving regulatory environment In addition to the foregoing, NGSO systems entering the market have triggered increased regulatory activity, including a draft EU Space Act. Existing regulations are changing quickly and new, sometimes stricter regulations, especially for NGSO systems, are being considered. There is a risk that new or revised rules could be adopted that could have a material, adverse impact on the Telesat Lightspeed constellation. Telesat’s operations may be limited or precluded by ITU rules or processes, including deployment milestones and timelines, and/or by the requirement to coordinate its operations with those of other satellite operators, and/or by the requirement to meet power limits to protect GEO. ITU requirements and interaction with other operators’ filings The ITU, a United Nations specialized agency, regulates the global registration of radio frequency assignments. Only member states can apply for radio frequency assignments. Consequently, Telesat must rely on a member state to secure frequency assignments, and then obtain a licence to those frequency assignments from that member state. 32 Table of Contents Access to the radio frequency spectrum is governed by the ITU Radio Regulations (“RR”), established in accordance with an international treaty. The ITU RR are periodically reviewed and revised at World Radiocommunication Conferences, which take place typically every four years. Services other than satellites services also use the radio frequency spectrum, which can limit the availability of radio frequency spectrum for satellite services. For example, terrestrial operators are increasingly seeking additional radio frequency assignments, including frequencies currently designated for exclusive or shared use by satellite systems, to support the increasing demand for terrestrial services. As a result, Telesat cannot guarantee that the ITU rules will not change in the future in a way that could limit or preclude Telesat’s use of spectrum. The ITU RR define the coordination, notification and recording procedures to obtain rights to use frequencies, with the aim to secure entry of the frequencies in the Master International Frequency Register (“MIFR”), including those frequencies used by Telesat’s GEO satellites and the Telesat Lightspeed NGSO system. In most of the frequency bands used or intended to be used by Telesat, a “first-come, first-served” procedure applies among GEO networks, among NGSO systems, or between GEO networks and NGSO systems, whereby earlier-registered networks or systems are protected from interference due to later-registered networks or systems. To comply with the ITU rules, Telesat must coordinate its networks and systems with ITU priority networks and systems. Coordination may also be required with networks or systems that do not have ITU priority but have been identified by an administration where market access is being sought. The coordination process requires potentially lengthy and costly negotiations, and in the case of the Mil-Ka frequency bands, additional approvals would be required, but the exact process and nature of those approvals are not well established because of the limited use of these frequencies by commercial operators in the past. The failure to reach appropriate arrangements may render it impossible to secure entry of the frequencies into the MIFR, result in substantial restrictions on the use and operations of our existing satellites, or limit market access opportunities. In addition, while the approach and technical conditions for sharing spectrum among GEO networks is well established, the process for large NGSO systems that provide broadband services is still being developed. Because the coordination of NGSO systems is both technically complex and still under development, uncertainties exist about spectrum sharing, which may limit Telesat’s ability to operate and hence monetize its Telesat Lightspeed constellation. Consequently, Telesat’s ability to use shared spectrum for its Telesat Lightspeed constellation may be adversely impacted by new rules, the implementation of existing rules, or the absence of rules for spectrum sharing. In the event there is no coordination agreement, the ITU rules permit networks and systems to operate on a “non-interference, no-protection” basis, however if interference is experienced, the lower priority network or system must cease transmission (if it is causing interference) or accept the interference (if it is receiving the interference). Among GEO networks there exists at the ITU an agreed methodology to calculate the maximum allowed interference; however, when an NGSO system is involved, so far there is no agreed methodology to determine how much interference a lower priority system can cause and still qualify as operating on a “non-interference” basis. Thus, it is not yet known either how much interference higher priority systems will be subject to from lower priority systems operating on a non-interference basis nor how large an operating impediment it will be for lower priority systems to operate on a non-interference basis. In addition, while the ITU RR may require later-in-time systems to coordinate their operations with Telesat, it cannot guarantee that other operators will conduct their operations so as to avoid transmitting any signals that would cause harmful interference to the signals that Telesat, or its customers, transmit. In the extreme, this interference could require Telesat to take steps that could have a material adverse effect on results of operations, business prospects and financial condition. In some cases, NGSO must protect GEO regardless of the timing of the applications by not exceeding maximum power levels. Telesat Lightspeed can meet those power levels based on the current approach by the ITU to examine compliance; however, the approach to examine compliance may be updated following the results of technical studies commissioned by the 2023 World Radiocommunication Conference and to be completed in 2027. If certain proposed methods of testing compliance are adopted, Telesat Lightspeed could be obliged to reduce power levels, and, depending on the degree of required power reduction, the system capacity could be impacted. Finally, in the event disputes arise, the ITU RR do not contain mandatory dispute resolution or enforcement regulations and neither the ITU specifically, nor international law generally, provides clear remedies if the ITU coordination process fails. Failure to coordinate its satellites’ frequencies successfully or to obtain or maintain other required regulatory approvals could have an adverse effect on results of operations, business prospects and financial condition, as well as on the value of the business. 33 Table of Contents ITU deployment milestones and timelines In accordance with the ITU RR, governments have rights to use radio frequency assignments at certain GEO orbital locations and in NGSO orbits. Governments have, in turn, authorized operators, including Telesat, to use these radio frequency assignments. Under the ITU RR, frequencies must be brought-into-use (“BIU”) within a fixed period of time. Once brought into use, the ITU rules require that there not be a period longer than three years without a satellite on-station that is capable of operating under the orbital parameters of a filing. Telesat has been granted regulatory authorizations for certain spectrum at GEO locations or in NGSO orbits that is not currently implemented or in which the full complement of satellites has not yet been deployed. Under the ITU RR satellite deployment milestones apply for ITU NGSO systems. In general, there are milestone deadlines by which 10%, 50% and 100% of the satellites in the ITU filing must be deployed. In the case of the 10% and 50% milestones, if a deadline is missed it is still possible to take advantage of a deployment factor: if, at the 10% deadline, there are fewer than 10% of the total number of satellites in the ITU filing deployed, the modified total number of satellites shall not be greater than 10 times the number of satellites deployed; and if, at the 50% deadline, there are fewer than 50% of the total number of satellites in the ITU filing deployed, the modified total number of satellites shall not be greater than two times the number of satellites deployed. At the 100% milestone deadline, the number of satellites already deployed is the total number allowed for the ITU NGSO system. If Telesat is unable to implement frequencies at GEO locations or in NGSO orbits in a manner that satisfies the ITU RR and national regulatory requirements, or if the ITU or national regulatory requirements were to change, or if it is unable to maintain satellites or make use of all of the frequencies for which it has been authorized, Telesat may lose its rights to use these orbital resources and they would become available for other satellite operators to use. The loss of one or more of its orbital resources could negatively affect its plans and ability to implement its business strategy. If Telesat does not obtain required security clearances from, and comply with any agreements entered into with, the U.S. DoD, or if Telesat does not comply with U.S. law, Telesat may not be able to sell Telesat Lightspeed services to the U.S. government. To participate in classified U.S. government programs, Telesat may seek and obtain security clearances for one or more of its subsidiaries from the U.S. Department of Defense (“DoD”). Given Telesat is not domiciled in the U.S., Telesat has entered into agreements with the U.S. government that may limit its ability to control the operations of this subsidiary, as required under the national security laws and regulations of the U.S. If Telesat does not obtain and maintain these security arrangements, Telesat’s ability to sell Telesat Lightspeed services to the U.S. government will be limited. As a result, Telesat’s business could be materially and adversely affected. Risks Relating to Intellectual Property If we are unable to obtain, maintain, protect and enforce patent and other intellectual property protection for our technology and services, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets. Our success may depend, in part, on our ability to obtain, maintain, protect and enforce patent and other intellectual property protection with respect to our services and technology we develop. If we fail to obtain, maintain, protect and enforce our intellectual property, third parties may be able to compete more effectively against us, we may lose our technological or competitive advantage, or we may incur substantial litigation costs in our attempts to recover or restrict use of our intellectual property. We may not be able to obtain and maintain intellectual property or other proprietary rights necessary to our business or in a form that provides us with a competitive advantage. For example, our trade secrets, data and know-how could be subject to unauthorized use, misappropriation or disclosure to unauthorized parties, despite our efforts to enter into confidentiality agreements with our employees, consultants, contractors, clients and other vendors who have access to such information, and could otherwise become known or be independently discovered by third parties. Despite our efforts to protect our intellectual property, unauthorized parties may be able to obtain and use information that we regard as proprietary. 34 Table of Contents Given that patent applications are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our services. The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability and our owned and in-licensed issued patents may be challenged in courts or patent offices in the United States and abroad. It is also possible that we will fail to identify patentable aspects of our research and development output in time to obtain patent protection. We cannot be certain that we were the first to make the inventions claimed in our owned or in-licensed issued patents or pending patent applications, or that we were the first to file for patent protection of such inventions. If a third party can establish that we or our licensors were not the first to make or the first to file for patent protection of such inventions, our owned or in-licensed patent applications may not issue as patents and even if issued, may be challenged and invalidated or rendered unenforceable. Third parties may also have blocking patents that could prevent us from marketing our own services and practicing our own technology. Failure to obtain and maintain patents, trademarks and other intellectual property rights necessary to our business and failure to protect, monitor and control the use of our intellectual property rights could negatively impact our ability to compete and cause us to incur significant expenses. which could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects. We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might adversely affect our ability to develop and market our services. We cannot guarantee that any of our patent searches or analyses, including the identification of relevant patents or the scope of patent claims, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States and abroad that is relevant to or necessary for the commercialization of our current and future services in any jurisdiction. The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market our services. We may incorrectly determine that our services are not covered by a third-party patent or may incorrectly predict whether a third party’s pending application will issue with claims of relevant scope. We may be subject to claims that we or our employees have misappropriated the intellectual property of a third party, including trade secrets or know-how, or are in breach of non-competition or non-solicitation agreements with our competitors and third parties may claim an ownership interest in intellectual property we regard as our own. Many of our employees and consultants were previously employed at or engaged by our competitors or potential competitors. Some of these employees, consultants and contractors, may have executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our employees and consultants do not use the intellectual property, proprietary information, know-how or trade secrets of others in their work for us, we may be subject to claims that we or these individuals have, inadvertently or otherwise, misappropriated the intellectual property or disclosed the alleged trade secrets or other proprietary information, of these former employers or competitors. Litigation may be necessary to defend against these claims, and if we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. It may be necessary or we may desire to enter into a license to settle any such claim; however, there can be no assurance that we would be able to obtain a license on commercially reasonable terms, if at all. We may in the future also be subject to claims by our former employees, consultants or contractors asserting an ownership right in our patents or patent applications, as a result of the work they performed on our behalf. Although we generally require all of our employees, consultants, contractors and any other partners or collaborators who have access to our proprietary know-how, information or technology to assign or grant similar rights to their inventions to us, we cannot be certain that we have executed such agreements with all parties who may have contributed to our intellectual property, nor can we be certain that our agreements with such parties will be upheld in the face of a potential challenge, or that they will not be breached, for which we may not have an adequate remedy. 35 Table of Contents We may become a party to intellectual property litigation or administrative proceedings that could be costly and could interfere with our ability to sell and market our services. It is possible that U.S. and foreign patents and pending patent applications, copyrights, or trademarks controlled by third parties may be alleged to cover our services, or that we may be accused of misappropriating third parties’ trade secrets. Additionally, our services make use of components that we purchase from vendors, and may include design components that are outside of our direct control. Our competitors, some of which have substantially greater resources and have made substantial investments in patent portfolios, trade secrets, copyrights, trademarks and competing technologies, may have applied for or obtained, or may in the future apply for or obtain, patents, copyrights, or trademarks that will prevent, limit or otherwise interfere with our ability to make, use, sell and/or export our services or to use product names. We may in the future become party to adversarial proceedings or litigation where our competitors or other third parties may assert claims against us, alleging that our technology or services infringe, misappropriate or otherwise violate their intellectual property rights, including patents and trade secrets. The defense of these matters can be time consuming, costly to defend in litigation, divert management’s attention and resources, damage our reputation and brand and cause us to incur significant expenses or make substantial payments. Further, if patents, trademarks, copyrights, or trade secrets are successfully asserted against us, this may harm our business and result in injunctions preventing us from developing, manufacturing, marketing or selling our services, or result in obligations to pay license fees, damages, attorney fees and court costs, which could be significant. Although patent, copyright, trademark, trade secret and other intellectual property disputes in our industry have often been settled through licensing or similar arrangements, costs associated with such arrangements may be substantial and could include ongoing royalties. We may be unable to obtain necessary licenses on satisfactory terms, if at all. In addition, if any license we obtain is non-exclusive, we may not be able to prevent our competitors and other third parties from using the intellectual property or technology covered by such license to compete with us. If we do not obtain necessary licenses, we may not be able to redesign our services to avoid infringement. Any of these events could materially and adversely affect our business, financial condition and results of operations. Additionally, we may file lawsuits or initiate other proceedings to protect or enforce our patents or other intellectual property rights, which could be expensive, time consuming and unsuccessful. Competitors may infringe our issued patents or other intellectual property, which we may not always be able to detect. Even if resolved in our favor, litigation or other proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our personnel from their normal responsibilities. Because of the expense and uncertainty of litigation, we may not be in a position to enforce our intellectual property rights against third parties. Because of the expense and uncertainty of litigation, we may conclude that even if a third party is infringing, misappropriating or otherwise violating our owned or in-licensed patents, any patents that may be issued as a result of our future patent applications, or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such a claim or action may be too high or not in the best interest of our company or our shareholders. In such cases, we may decide that the more prudent course of action is to simply monitor the situation or initiate or seek some other non-litigious action or solution. Intellectual property rights do not necessarily address all potential threats to our ability to compete. The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative: • others may be able to make a product that is similar to our current services and future services we intend to commercialize and that is not covered by the patents that we own or exclusively in-license and have the right to enforce; • we and any of our current or future licensors or collaborators might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own, license or may own or license in the future; 36 Table of Contents • we or any of our current or future licensors or collaborators might not have been the first to file patent applications covering certain of our inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing, misappropriating or otherwise violating our intellectual property rights; • it is possible that our current or future owned or in-licensed patent applications will not lead to issued patents; • issued patents that we own or in-license may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges, including as a result of legal challenges by our competitors; • we may not develop additional proprietary technologies that are patentable; and • we may choose not to file a patent for certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property. Risks Relating to the Ownership of Telesat Public Shares and Telesat Partnership Units Each of MHR and PSP Investments have substantial governance rights over Telesat, and their interests may conflict with or differ from the interests of the other Telesat shareholders. Telesat’s governing documents contain special rights of each of MHR and PSP Investments to veto or participate in certain activities of Telesat. Such rights include, without limitation, the ability of each of MHR and PSP Investments to veto certain proposed changes to be taken by Telesat, including making changes to its respective organizational documents, restructurings, the declaration and payment of non-pro rata dividends and certain tax elections. These documents also provide, among other things, for MHR and PSP Investments to each designate three directors to Telesat’s board of directors. See the sections of this Annual Report entitled “Composition of the Telesat Corporation Board and Committees” and “Related Party Transactions — Investor Rights Agreements” for additional information on the negotiated rights of MHR and PSP Investments. The interests of either or both of MHR and PSP Investments may diverge from those of other Telesat shareholders, and each may exercise its respective voting and other rights in a manner adverse to the interests of such other holders. Each of MHR and PSP Investments have significant voting power in Telesat and their interests may conflict with or differ from the interests of the other Telesat shareholders. Both MHR and PSP Investments, and their affiliates, maintain significant voting interests in Telesat. The voting interests of each of MHR and PSP Investments, along with their governance rights, provide MHR and PSP with substantial control over Telesat. As a result, MHR and PSP Investments will have the ability to influence many matters affecting Telesat and actions may be taken that other shareholders may not view as beneficial or align with their interests. Additionally, the market price of the Telesat Public Shares could be adversely effected due to the significant control exercised by MHR and PSP Investments. Such control may also discourage transactions involving an offer for control of Telesat in which an investor may otherwise receive a premium for its Telesat Public Shares over the then-current market price, or discourage competing proposals if a going private transaction or change of control transaction is proposed by either MHR or PSP Investments. The vote of the holders of Class B Variable Voting Shares voting with respect to a particular matter may be diluted by the Golden Share. In order to maintain Telesat’s status as Canadian, the Telesat Articles employ a variable voting mechanism by way of, amongst other controls, the “Golden Share,” as discussed further in Exhibit 2.6 under the section “Meetings of Shareholders and Voting Rights — Golden Share Mechanic.” The voting power attributed to the Golden Share will vary to ensure that the aggregate number of votes cast by Canadians, including Red Isle, with respect to a particular matter, will equal a simple majority of all votes cast in respect of such matter, resulting in the dilution of the voting power of Telesat’s non-Canadian shareholders. Moreover, if a person who is not Canadian controls one-third or more of the votes of the Telesat Corporation Shares and the Telesat Partnership Units, any voting power of that shareholder in excess of one-third of the voting power (less one vote) of the Telesat Corporation Shares will be attributed to the Golden Share and voted by the Trustee as provided in the Telesat Articles. 37 Table of Contents Telesat may issue additional equity, which may be highly dilutive, may include terms with preferences that could adversely affect the rights of the shareholders of Telesat and/or may cause the market price of Telesat Public Shares to decline. Telesat may raise additional equity capital to fund Telesat Lightspeed, including through the issuance of Telesat Corporation Shares or other equity interests of Telesat or any one or more of its subsidiaries. Telesat may also issue additional equity in order to refinance its existing debt. Any such future issuance by Telesat and/or its subsidiaries could result in potential substantial ownership dilution to the shareholders of Telesat, which is not reflected in the beneficial ownership calculations presented in this Annual Report. In addition, newly issued securities may include liquidation or other preferences that could adversely affect the rights of the shareholders of Telesat and/or holders of Telesat Partnership Units. Furthermore, the future issuance of additional securities, whether equity or debt, by Telesat and/or its subsidiaries, or the perception that these issuances may occur, may cause the market price of the Telesat Public Shares to decline. This could also impair the ability of Telesat and/or its subsidiaries to raise additional capital through the sale of securities. So long as the number of Class B Variable Voting Shares and Class B Units exceeds the number of Class A Shares, Class C Shares, Class A Units and Class C Units on matters submitted to a vote of the holders of equity in Telesat Corporation (but not with respect to Second Tabulation matters): (1) the issuance of additional Class B Variable Voting Shares would have the effect of diluting the voting power of the then existing holders of the Class B Variable Voting Shares and Class B Units, but not the voting power of the then existing holders of the Class A Shares, Class C Shares, Class A Units and Class C Units, and (2) the issuance of additional Class A Shares would have the effect of diluting the voting power of the then existing holders of the Class A Shares, Class C Shares, Class A Units and Class C Units, but not the voting power of the then existing holders of the Class B Variable Voting Shares and Class B Units. See Exhibit 2.6 “Meetings of Shareholders and Voting Rights — Golden Share Mechanic”, and “— Risks Relating to the Ownership of Telesat Public Shares and Telesat Partnership Units — The vote of the holders of Class B Variable Voting Shares voting with respect to a particular matter may be diluted by the Golden Share”. The exchange of Telesat Partnership Units for Telesat Public Shares is subject to certain restrictions and the value of Telesat Public Shares received in any exchange may fluctuate. Holders of Telesat Partnership Units may be unable to exit their position when desired. The governance documents of Telesat and Telesat Partnership provide for the holders of Telesat Partnership Units to elect to exchange their interests generally on a 1:1 basis (subject to the terms described in Exhibit 2.6 entitled “Meetings of Shareholders and Voting Rights — Golden Share Mechanic”) into the corresponding class of Telesat Corporation Shares at such holder’s election. Any such exchange will be facilitated by a third-party exchange agent engaged by Telesat for this purpose, and is expected to settle within two U.S. business days (T+2). Because the parties have no control over this third party but are relying on the exchange agent to complete each exchange, the timing of settlement cannot be guaranteed. Telesat Partnership Units are non-transferrable and need to be exchanged for Telesat Corporation Shares in order for the holder to monetize its interest in Telesat Partnership, which could delay or impede such holder’s ability to access liquidity in the market. The Telesat Public Shares into which Telesat Partnership Units may be exchanged may be subject to significant fluctuations in value for many reasons, as further described herein. As described in greater detail below under the section entitled “— Risks Relating to Tax Matters,” it is also expected that the exchange of Telesat Partnership Units for Telesat Public Shares will be an exchange upon which gain or loss is recognized for U.S. federal income tax purposes. Telesat has certain indemnification obligations and additional obligations to PSP Investments, which in certain circumstances will be uncapped and may result in dilution to the then other shareholders of Telesat. Telesat and Telesat CanHoldco have indemnified PSP Investments on a grossed-up basis for PSP Investments’ pro rata share of costs relating to: (a) certain losses and litigation proceedings related to the Transaction, (b) certain losses with regard to Loral and out-of-pocket expenses of Loral and (c) certain tax matters. This indemnification will be (i) independent of the accuracy of the underlying representations and warranties and (ii) subject to additional, customary limitations. In the case of indemnification for certain tax matters only, there will be a cap of US$50,000,000 (other than with respect to defense costs and gross-up payments) and all other indemnification obligations will be uncapped. In addition, as provided in the Transaction Agreement, these indemnification obligations may be satisfied in the form of cash, unless, upon the 38 Table of Contents determination of the board of directors of Telesat, making such cash payment would unduly constrain the liquidity needs of the go-forward business, in which case such indemnification obligations may be satisfied by issuing Class C Shares valued at the 30-day volume-weighted average price (“VWAP”) as of the date on which such payment is required to be made. Any such issuance of Class C Shares to Red Isle may result in dilution to the other shareholders of Telesat. There is no assurance that Telesat will pay any cash dividends or that investors will realize gains on Telesat Public Shares. Any determination to pay dividends in the future will be at the discretion of Telesat’s board of directors, as described in Exhibit 2.6 under “Dividend Entitlements,” and will depend upon results of operations, financial condition, contractual restrictions, including agreements governing its debt and equity financing and any future indebtedness it may incur, restrictions imposed by applicable law and other factors Telesat’s board of directors deems relevant. The current expectation is that in the near term Telesat will not pay dividends but will retain its cash on hand for the purpose of funding the Telesat Lightspeed constellation, funding other capital investments and/or paying down debt. Realization of a gain on the Telesat Public Shares will depend on the appreciation of the price of Telesat Public Shares, which may never occur. See “Dividend Policy.” In certain circumstances, a limited partner of Telesat Partnership may lose its limited liability status. The Limited Partnerships Act (Ontario) (“Limited Partnerships Act”) provides that a limited partner benefits from limited liability unless, in addition to exercising rights and powers as a limited partner, such limited partner takes part in the control of the business of a limited partnership of which such limited partner is a partner. Subject to the provisions of the Limited Partnerships Act and of similar legislation in other jurisdictions of Canada, the liability of each limited partner of Telesat Partnership for the debts, liabilities and obligations of Telesat Partnership will be limited to such limited partner’s capital contribution, plus such limited partner’s share of any undistributed income of Telesat Partnership. The limitation of liability conferred under the Limited Partnerships Act may be ineffective outside Ontario except to the extent it is given extraterritorial recognition or effect by the laws of other jurisdictions. There may also be requirements to be satisfied in each jurisdiction to maintain limited liability. If limited liability is lost, limited partners of Telesat Partnership may be considered to be general partners (and therefore be subject to unlimited liability) in such jurisdiction by creditors and others having claims against Telesat Partnership. The market price of the Telesat Public Shares may be volatile and may be affected by market conditions beyond Telesat’s control. The market price of the Telesat Public Shares is subject to significant fluctuations in response to, among other factors: • variations in Telesat’s operating results and market conditions specific to companies in the satellite services industry; • changes in financial estimates or recommendations by securities analysts; • announcements of innovations or new products or services by Telesat or its competitors; • the emergence of new competitors; • operating and market price performance of other companies that investors deem comparable; • changes in Telesat’s board or management; • sales or purchases of the Telesat Public Shares by insiders; • commencement of, or involvement in, litigation; • changes in governmental regulations; and • general economic conditions and slow or negative growth of related markets. 39 Table of Contents In addition, if the market for stocks in Telesat’s industry experiences a loss of investor confidence, the market price of the Telesat Public Shares could decline for reasons unrelated to Telesat’s business, financial condition or results of operations. The market price of the Telesat Public Shares may be adversely affected by market conditions affecting the stock markets in general. Market conditions may result in volatility in the level of, and fluctuations in, market prices of stocks generally and, in turn, result in sales (including sales following the exchange of Telesat Partnership Units for Telesat Corporation Shares) of substantial amounts of the Telesat Public Shares in the market that may cause the market price of the Telesat Public Shares to fall dramatically. A weak global economy or other circumstances, such as changes in tariffs and trade, geopolitical conditions, and global health emergencies, could also contribute to extreme volatility of the markets, which may also have an adverse effect on the market price of the Telesat Public Shares. In addition, if any of the foregoing occurs, it could not only cause the price of the Telesat Public Shares to fall but also may expose Telesat to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to the board of directors and management. As a “foreign private issuer” under the rules and regulations of the SEC, Telesat is permitted to file less or different information with the SEC than a company incorporated in the U.S. or otherwise subject to these rules, and will follow certain home country corporate governance practices in lieu of certain NASDAQ requirements applicable to U.S. issuers. Telesat is considered a “foreign private issuer” under the Exchange Act and is therefore exempt from certain rules under the Exchange Act, including the proxy rules, which impose certain disclosure and procedural requirements for proxy solicitations for U.S. and other issuers. Moreover, Telesat is not required to file periodic reports and financial statements with the SEC as frequently or within the same time frames as U.S. companies with securities registered under the Exchange Act. Telesat currently prepares its financial statements in accordance with IFRS Accounting Standards. Telesat is not required to file financial statements prepared in accordance with or reconciled to U.S. GAAP so long as its financial statements are prepared in accordance with IFRS Accounting Standards as issued by the IASB. Telesat is not required to comply with Regulation FD, which imposes restrictions on the selective disclosure of material information to shareholders. Telesat’s officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of Telesat’s securities. In addition, as a foreign private issuer, Telesat follows certain home country corporate governance practices in lieu of certain exchange requirements. A foreign private issuer must disclose in its Annual Reports filed with the SEC each exchange listing requirement with which it does not comply followed by a description of its applicable home country practice. Telesat could lose its status as a “foreign private issuer” under current SEC rules and regulations if more than 50% of Telesat’s outstanding voting securities become directly or indirectly held of record by U.S. holders and one of the following is true: (i) the majority of Telesat’s directors or executive officers are U.S. citizens or residents; (ii) more than 50% of Telesat’s assets are located in the U.S.; or (iii) Telesat’s business is administered principally in the U.S. If Telesat loses its status as a foreign private issuer, it will no longer be exempt from the rules described above and, among other things, will be required to file periodic reports and annual and quarterly financial statements as if it were a U.S. domestic issuer. If this were to happen, Telesat would likely incur substantial costs in fulfilling these additional regulatory requirements and members of Telesat’s management would likely have to divert time and resources from other responsibilities to ensuring these additional regulatory requirements are fulfilled. The Telesat Articles provide that the courts of British Columbia will be the sole and exclusive forum for certain shareholder litigation matters, which could limit the ability of holders of Telesat Shares to choose a judicial forum for disputes with Telesat or its directors and officers. Under the Telesat Articles, unless Telesat consents in writing to the selection of an alternative forum, the courts of British Columbia will be the exclusive jurisdiction for (a) any derivative action or proceeding brought on behalf of Telesat; (b) any action or proceeding asserting a breach of a fiduciary duty owed to Telesat by any director, officer, or other employee of Telesat; (c) any action or proceeding asserting a claim arising pursuant to any provision of the BCBCA 40 Table of Contents or the Telesat Articles; or (d) any action or proceeding asserting a claim otherwise related to the relationships among Telesat, its subsidiaries and its and their respective shareholders, directors and officers (but excluding claims related to the business of Telesat or its subsidiaries). The Telesat Articles further provide that if a shareholder commences an action outside of the courts of British Columbia, the shareholder will be deemed to consent to (i) the jurisdiction of the British Columbia courts and (ii) service on a shareholder being made by service on such shareholder’s counsel (in lieu of such shareholder), in respect of such action. While these provisions are intended to provide increased consistency in the application of law in the types of lawsuits to which it applies, as a result of these provisions, a U.S. shareholder may be forced to pursue such claims in the courts of British Columbia, which may entail added expense, compliance with an unfamiliar foreign legal regime, and difficulty in enforcing a judgment against non-Canadian persons. The foregoing provisions should not apply to other types of suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which United States federal courts have exclusive jurisdiction. Further, under the Securities Act, federal and state courts have concurrent jurisdiction over all suits brought to enforce any duty or liability created by the Securities Act, and equity holders cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Accordingly, a court may determine that this provision is unenforceable to the extent it relates to such laws, rules and regulations, and to the extent it is enforceable, the provision may have the effect of discouraging lawsuits against Telesat’s directors and officers. The Telesat Articles include a renunciation of certain business opportunities which could enable related parties to benefit from business opportunities that might otherwise be available to Telesat. The Telesat Articles provide for the renunciation of certain enumerated business opportunities by Telesat and its subsidiaries. This includes an acknowledgement by Telesat that (i) its directors, (ii) its shareholders that employ, retain or are otherwise associated with, or designate or nominate, directors, and/or (iii) their affiliates, may become aware, from time to time, of certain business opportunities (such as investment opportunities) and may direct such opportunities to other businesses in which they have invested, with no obligation to make Telesat aware of any business opportunities that have been renounced by Telesat. Further, such businesses, including entities in which MHR and PSP Investments invest, may choose to compete with Telesat for renounced business opportunities and for business opportunities that have been separately discovered by the directors and their related parties, possibly causing these opportunities to not be available to Telesat or causing them to be more expensive for Telesat to pursue. These potential conflicts of interest could adversely impact Telesat’s business or prospects if attractive business opportunities are procured by such parties for their own benefit rather than for the benefit of Telesat. Risks Relating to Tax Matters U.S. Tax Risks Telesat or Telesat Partnership could be treated as a U.S. corporation for U.S. federal income tax purposes. Telesat and Telesat Partnership are classified as a non-U.S. corporation and a non-U.S. partnership, respectively, under general rules of U.S. federal income taxation. Unlike U.S. persons, who are generally subject to U.S. tax on worldwide income, non-U.S. persons are subject to U.S. income tax only on certain income from U.S. sources and from conducting business. Section 7874 of the Internal Revenue Code of 1986, as amended (the “Code”), and certain regulatory provisions promulgated under Section 7874, however, contain rules that, if applicable, could cause Telesat or Telesat Partnership to be taxed as a U.S. corporation for U.S. federal income tax purposes. This treatment would apply only if (i) Telesat or Telesat Partnership acquired substantially all of the stock or assets of Loral (the “Acquisition Requirement”), (ii) following the acquisition, former shareholders of Loral own at least 80% of Telesat or Telesat Partnership by reason of their ownership of stock of Loral (the “80% Ownership Test”), (iii) the level of business activities conducted by Telesat or Telesat Partnership and its affiliates in Canada did not satisfy a certain minimum threshold level of activity (“Substantial Business Activities”), and (iv) in the case of Telesat Partnership, it is treated as a publicly traded partnership. These statutory and regulatory rules are complex and there is little administrative guidance regarding their application. 41 Table of Contents Prior to consummation of the Transaction, Loral received an opinion from special tax counsel that upon consummation of the Transaction, neither Telesat nor Telesat Partnership should be taxed as a U.S. corporation. Such opinion, however, provides no assurance that the IRS may not take a position contrary to the opinion or that a court considering the issue may not hold otherwise. Further, such opinion does not consider any legislative proposals to lower the threshold for the 80% Ownership Test to 50% (or some other percentage). While the Transaction Agreement was entered into on November 23, 2020, it is possible that such legislative proposals, if enacted, might be applied on a retroactive basis, with no grandfather clause for transactions executed pursuant to a binding commitment entered into prior to such legislation’s enactment. If it were determined that Telesat or Telesat Partnership should be taxed as a U.S. corporation for U.S. federal income tax purposes, Telesat or Telesat Partnership, as applicable, would be subject to U.S. federal tax return filing requirements and would be subject to U.S. tax on its worldwide income. Any foreign taxes, including Canadian taxes, paid by it would be creditable subject to several limitations, which could be material limitations. Telesat or Telesat Partnership could be treated as a surrogate foreign corporation for U.S. federal income tax purposes and Loral could be treated as an expatriated entity, which might have adverse U.S. tax consequences for Loral and for shareholders of Telesat. Even if neither Telesat nor Telesat Partnership is treated as a U.S. corporation as described above, Section 7874 of the Code and the associated regulations contain an alternative set of rules that could result in Telesat or Telesat Partnership being treated as a “surrogate foreign corporation,” and Loral being treated as an expatriated entity, if (i) the Acquisition Requirement is satisfied, (ii) following the acquisition, former shareholders of Loral own at least 60% of Telesat or Telesat Partnership by reason of their ownership of Loral stock (the “60% Ownership Test”), (iii) Telesat or Telesat Partnership does not have Substantial Business Activities in Canada, and (iv), in the case of Telesat Partnership, it is treated as a publicly traded partnership. Prior to consummation of the transaction, Loral received an opinion from special tax counsel that, though it is not free from doubt, Telesat should not be treated as a surrogate foreign corporation. As mentioned above, Loral also received an opinion that Telesat Partnership should neither be treated as a publicly traded partnership, nor, accordingly, a surrogate foreign corporation. If Telesat Partnership were treated as a publicly traded partnership, it would be treated as a surrogate foreign corporation effective as of the consummation of the Transaction. Special tax counsel’s opinion described above does not provide assurance that the IRS will not take a contrary position or that a court considering the issue would not hold otherwise. If it were determined that Telesat and/or Telesat Partnership should be treated as a surrogate foreign corporation and Loral should be treated as an expatriated entity, Loral would be subject to limitation as to the use of net operating losses and foreign tax credits to offset certain gain recognized in periods on or after the date of the Transaction. It is not anticipated that Loral will realize any material amount of gain upon or subsequent to the Transaction. If it did, however, the limitation as to the use of net operating losses and foreign tax credits could increase its potential U.S. tax liability. Absent a change in facts and circumstances or law, it is anticipated that Telesat will eventually become a surrogate foreign corporation, and that Loral will become an expatriated entity, upon the exchange of a sufficient number of Telesat Partnership Units for Telesat Public Shares to cause both the 60% Ownership Test and the Acquisition Requirement to be satisfied. Moreover, if Loral were determined to be an expatriated entity before December 22, 2027, Loral would be required to recapture the deduction it claimed on its 2017 U.S. federal income tax return under Section 965(c) of the Code and to pay additional tax in an amount equal to 35% of the amount of such deduction. It is anticipated that the amount of such recapture would be US$38,500,000. Consequently, such recapture would substantially increase Loral’s U.S. federal income tax liability for the year in which it was determined to be an expatriated entity. Under the terms of the Transaction Agreement, PSP Investments may be entitled to a grossed-up indemnification payment for its pro rata share of such tax. In addition, if Telesat were determined to be a surrogate foreign corporation, dividends paid by Telesat would not be treated as qualified dividend income under Section 1(h)(11) of the Code. Accordingly, non-corporate U.S. shareholders of Telesat would be subject to tax on such dividends at ordinary income rates of up to 37%, and not at the preferential 20% rate applicable under Section 1(h)(11) of the Code. 42 Table of Contents Telesat may have been a passive foreign investment company (a “PFIC”) for 2021, 2022, 2023, 2024, and 2025 and could be classified as a PFIC in 2026 and subsequent taxable years, potentially resulting in adverse U.S. tax consequences to its U.S. shareholders. Generally, if for any taxable year 75% or more of a foreign corporation’s gross income is passive income, or at least 50% of the average percentage of assets held by such foreign corporation are held for the production of, or produce, passive income, the foreign corporation is classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. Under the complex PFIC look-through rules, for purposes of determining whether a foreign corporation should be classified as a PFIC, such foreign corporation will generally be treated as if it owns a proportionate share of the assets of, and earns a proportionate share of the income earned by, any subsidiary corporation if the foreign corporation owns at least 25% (by value) of the stock of any such subsidiary corporation. Furthermore, similar look-through rules apply to partnerships in which a foreign corporation owns at least a 25% interest. During 2021 after the Transaction and during a portion of 2022, Telesat owned only approximately 24% of the Telesat Partnership Units. Telesat’s ownership interest in Telesat Partnership increased during 2022 and has further increased each year thereafter. As of December 31, 2022, December 31, 2023, December 31, 2024, and December 31, 2025, Telesat’s ownership interest in Telesat Partnership was 25.7%, 27.2%, 28%, and 29.1%, respectively. While not free from doubt, Telesat believes that, by virtue of additional value associated with its interest as general partner of Telesat Partnership, Telesat owned at least 25% of the total value of Telesat Partnership (and indirectly in the wholly owned corporate subsidiaries of Telesat Partnership) during 2021 and 2022. In addition, Telesat owned more than 25% of the total value of Telesat Partnership (and indirectly in the wholly owned corporate subsidiaries of Telesat Partnership) during 2023, 2024 and 2025. Based on the foregoing, Telesat believes it was not a PFIC for any of its 2021-2025 taxable years, taking into account the income and assets of the wholly owned corporate subsidiaries of Telesat Partnership. Telesat can provide no guarantee that the IRS will not successfully challenge this position upon any audit of a U.S. holder. The determination as to whether Telesat should be classified as a PFIC for 2026 and years thereafter will be a factual determination that must be made annually at the close of each taxable year and will be based upon the composition of Telesat’s income and assets (including certain entities in which Telesat holds at least a 25% interest), which may be subject to change. As a result, it is not possible to determine whether Telesat will be characterized as a PFIC for 2026 or any other future year until after the close of such future year. While Telesat intends to manage its business so as to avoid PFIC status to the extent possible and consistent with its other business goals, Telesat cannot predict whether its business plans will allow it to avoid PFIC status. In addition, because the market price of the Telesat Public Shares has fluctuated and is likely to fluctuate in the future, and because that market price may affect the determination of whether Telesat is a PFIC, there can be no guarantee that Telesat will not be a PFIC for any taxable year. U.S. holders of Telesat Public Shares could suffer adverse tax consequences as a result of the classification of Telesat as a PFIC, including (i) having gains realized on the sale of the shares treated as ordinary income, rather than capital gain, (ii) not qualifying for the preferential rate that may otherwise be applicable to dividends received on the Telesat Public Shares, (iii) having interest charges apply to certain distributions by Telesat and to the proceeds of the sale of Telesat Public Shares, and (iv) additional reporting requirements. Telesat will use reasonable efforts to provide to U.S. holders the information needed to report income and gain pursuant to a “qualified electing fund” election, which election may alleviate some of the adverse tax consequences of PFIC status. However, if the IRS were to determine that Telesat Corporation was a PFIC for a year with respect to which we have determined that we were not a PFIC, it may be too late for a U.S. holder to make a timely QEF (or Mark-to-Market) election. See “Passive Foreign Investment Company Status” for more information. You are urged to consult your tax advisors regarding the application of the PFIC rules. Distributions from Telesat Partnership may be insufficient to pay tax on the allocation of income and/or gain for U.S. tax purposes. While Telesat Partnership intends to make certain distributions to holders of Telesat Partnership Units, a holder of Telesat Partnership Units may receive allocations of income and/or capital gains in a year for U.S. tax purposes without receiving sufficient cash distributions from Telesat Partnership for that year to pay any U.S. or other tax the holder may owe because of such allocation. In addition, there can be no assurance that Telesat Partnership will in fact make cash distributions as intended. Even if Telesat Partnership is unable to distribute cash in amounts that are sufficient to fund a holder’s tax liability, such holder will nonetheless be required to pay any applicable income taxes. 43 Table of Contents Canadian Tax Risks Telesat Partnership may be liable to pay tax under the SIFT Rules which may reduce after-tax returns to holders of Telesat Partnership Units and holders of Telesat Public Shares. Telesat Partnership is a “SIFT partnership” for the purposes of the Income Tax Act (Canada) (the “Tax Act”). As such, Telesat Partnership is subject to SIFT tax on its “taxable non-portfolio earnings” (as defined in the Tax Act), if any, including income, other than taxable dividends, from “non-portfolio property” (as defined in the Tax Act). In particular, Telesat Partnership would generally be required to pay SIFT tax if its Loral stock were non-portfolio property and the unlimited liability company (“Can ULC”) formed under the laws of British Columbia by Loral Holdings Corporation (“Loral Holdings”) and Telesat CanHoldco paid a dividend to Loral Holdings, subject to any deductions that may be available to Telesat Partnership in computing the income from its Loral stock. In particular, provided Loral Holdings and Loral each pay corresponding dividends in the same taxation year as any dividend paid by Can ULC, Telesat Partnership may have available to it and intends to claim sufficient deductions so that it does not have net income from non-portfolio property. Although it is intended that Loral Holdings and Loral would each pay corresponding dividends in the same taxation year as any dividend paid by Can ULC, no assurance can be given that such dividends will be paid or that such deductions will be available. If Telesat Partnership were required to pay SIFT tax, after-tax returns to holders of Telesat Partnership Units and indirectly to holders of Telesat Public Shares may be reduced. Telesat may be liable to pay tax in respect of dividends paid by Can ULC to Loral Holdings. Loral Holdings is a controlled foreign affiliate of Telesat Partnership for purposes of the Tax Act. As such, Telesat Partnership is required to include in its income for a year its share of the “foreign accrual property income” or “FAPI” (as defined in the Tax Act) of Loral Holdings for such year, including its proportionate share of any dividends paid by Can ULC to Loral Holdings in such year. In turn, Telesat must include in income its share of the FAPI (including such dividends paid by Can ULC to Loral Holdings) of Telesat Partnership. However, if Loral Holdings and Loral each pay corresponding dividends in the same taxation year, and provided that Loral is a “foreign affiliate” of Telesat for relevant purposes of the Tax Act, Telesat may deduct in computing its taxable income a prescribed portion of such dividends received by it through Telesat Partnership. In determining the amount of such dividends from Loral that may be deducted in computing its taxable income, Telesat intends not to take into account any deduction claimed by Telesat Partnership pursuant to subsection 91(5) of the Tax Act. Telesat believes that such interpretation is consistent with the rationale expressed by the Canada Revenue Agency (“CRA”) for its published administrative position in this regard, but no assurance can be given. If the deduction that Telesat would otherwise claim were limited, or if a deduction claimed by Telesat were denied or otherwise not available, Telesat may be liable to pay tax on some or all of its share of FAPI resulting from any dividends paid by Can ULC to Loral Holdings and after-tax returns to holders of Telesat Public Shares may be reduced. Non-Canadian limited partners may be subject to Canadian federal income tax with respect to any Canadian source business income earned by Telesat Partnership and may be required to file Canadian tax returns. Telesat, as general partner, intends to manage the affairs of Telesat Partnership to the extent possible so that it does not carry on business in Canada for the purposes of the Tax Act. Nevertheless, because the determination of whether Telesat Partnership is carrying on business in Canada for the purposes of the Tax Act is a question of fact that is dependent upon the relevant circumstances, the CRA might successfully assert that Telesat Partnership carries on business in Canada for the purposes of the Tax Act. If Telesat Partnership were considered to carry on business for the purposes of the Tax Act, holders of Telesat Partnership Units who are not, and are not deemed to be, resident in Canada for purposes of the Tax Act (“non-Canadian residents”), (i) would be subject to Canadian federal income tax on their proportionate share of any Canadian source business income earned or considered to be earned by Telesat Partnership, subject to any relief that may be provided by any applicable income tax treaty or convention, and (ii) may be required to file a Canadian federal income tax return. 44 Table of Contents Payments of dividends by Telesat CanHoldco to Telesat Partnership will be subject to Canadian federal withholding tax and if CRA does not apply their administrative position Telesat CanHoldco may be liable for additional amounts of Canadian federal withholding tax plus any associated interest and penalties in certain circumstances. Dividends paid or credited or deemed to be paid or credited to a partnership that is not a “Canadian partnership” (as defined in the Tax Act) by a corporation resident in Canada are subject to withholding tax at a 25% rate. Telesat Partnership is not a “Canadian partnership” for purposes of the Tax Act. However, in determining the rate of Canadian federal withholding tax applicable to dividends paid by Telesat CanHoldco to Telesat Partnership, Telesat, as general partner, expects Telesat CanHoldco to look through Telesat Partnership to its partners and, having regard to the CRA’s administrative practice in similar circumstances, (i) not to withhold on that portion of a dividend attributable to partners of Telesat Partnership (including Telesat) who are residents of Canada for purposes of the Tax Act, and (ii) to take into account any reduced rates of Canadian federal withholding tax to which limited partners who are non-Canadian residents may be entitled under an applicable income tax treaty or convention. There is a risk that the CRA will not apply its administrative practice such that Telesat CanHoldco may be liable for additional amounts of Canadian federal withholding tax plus any associated interest and penalties if it withholds tax at less than the 25% rate under the Tax Act. Distributions from Telesat Partnership may be insufficient to pay tax on the allocation of income and loss for tax purposes. While Telesat Partnership intends to make certain distributions to holders of Telesat Partnership Units, a holder may receive allocations of income and/or capital gains in a year for purposes of the Tax Act without receiving sufficient distributions from Telesat Partnership for that year to pay any tax the holder may owe because of such allocation. In addition, there can be no assurance that Telesat Partnership will in fact make cash distributions as intended. Even if Telesat Partnership is unable to distribute cash in amounts that are sufficient to fund a holder’s tax liability arising from any such allocation, such holder will nonetheless be required to pay any applicable income taxes. Certain Canadian rules in respect of foreign tax credits may apply to Telesat Partnership. The Tax Act contains anti-avoidance rules to address certain foreign tax credit generator transactions (the “Foreign Tax Credit Generator Rules”). Under certain Foreign Tax Credit Generator Rules, the “foreign accrual tax” (which is a deduction which may be available under the Tax Act) applicable to a FAPI inclusion of Telesat Partnership may be denied in certain specified circumstances, including where the direct or indirect share of the income of any member of Telesat Partnership that is a person resident in Canada or a “foreign affiliate” of such a person is, under a “relevant foreign tax law” (within the meaning attributed to it in the Tax Act), less than such member’s share of such income for purposes of the Tax Act. Although the Foreign Tax Credit Generator Rules are not expected to apply to Telesat Partnership, no assurances can be given in this regard. If the Foreign Tax Credit Generator Rules apply, the “foreign accrual tax” applicable to a FAPI inclusion will be denied and after-tax returns to holders of Telesat Public Shares may be reduced. Canadian tax laws, or the interpretation thereof, could change in a manner which adversely affects Telesat Partnership, Telesat, and holders of Telesat Partnership Units and/or Telesat Public Shares. There is a risk that Canadian tax laws, or the interpretation thereof, could change in a manner that adversely affects Telesat Partnership, Telesat, or the holders of Telesat Partnership Units and/or Telesat Public Shares. Changes in tax laws and unanticipated tax liabilities could adversely affect profitability. Telesat is subject to taxes in Canada and numerous foreign jurisdictions. Telesat’s tax liabilities could be adversely affected in the future by a number of factors, including changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws (or the manner in which tax authorities interpret and administer them), and the outcome of tax audits in various jurisdictions around the world. Many of the countries in which Telesat does business have or are expected to adopt changes to tax laws as a result of the Base Erosion and Profit Shifting (“BEPS”) final proposals from the Organisation for Economic Co-operation and Development (“OECD”) and specific country anti-avoidance initiatives. In particular, legislation to implement Canadian interest expense deduction limitation rules, consistent with the OECD’s recommendations as a result of the BEPS final proposals, was enacted by Parliament in 2024. These rules apply starting in 2024 and generally limit Canadian interest deductions and financing expenses to 30% of tax EBITDA. Such tax law changes increase uncertainty and may adversely affect Telesat’s tax provision. Telesat regularly assesses all of these matters to determine the adequacy of its tax provision, which is subject to significant judgment. 45 Table of Contents