FORM OF LETTER OF CREDIT REIMBURSEMENT AGREEMENT



 




EXHIBIT 10.43


EXECUTION COPY













$20,000,000




LETTER OF CREDIT REIMBURSEMENT AGREEMENT




between




SPACE SYSTEMS/LORAL, INC.,




as Borrower,




and




JPMORGAN CHASE BANK



 


Dated as of April 2, 2004


 


















 









 












TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page

	SECTION 1.	 	DEFINITIONS AND PRINCIPLES OF CONSTRUCTION	 	 	1	 
	 
	 	1.01.	 	Defined Terms	 	 	1	 
	 
	 	1.02.	 	Terms Generally	 	 	8	 
	 
	 	1.03.	 	Accounting Terms; GAAP	 	 	8	 
	SECTION 2.	 	LETTERS OF CREDIT	 	 	9	 
	 
	 	2.01.	 	General	 	 	9	 
	 
	 	2.02.	 	Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions	 	 	9	 
	 
	 	2.03.	 	Expiration Date	 	 	10	 
	 
	 	2.04.	 	Priority and Liens	 	 	10	 
	 
	 	2.05.	 	Reimbursement	 	 	10	 
	 
	 	2.06.	 	Obligations Absolute; Limitation of Liability	 	 	11	 
	 
	 	2.07.	 	Practices	 	 	13	 
	 
	 	2.08.	 	Disbursement Procedures	 	 	13	 
	 
	 	2.09.	 	Termination and Reduction of Commitment	 	 	13	 
	 
	 	2.10.	 	Fees	 	 	13	 
	 
	 	2.11.	 	Default Rate of Interest	 	 	14	 
	 
	 	2.12.	 	Increased Costs	 	 	14	 
	 
	 	2.13.	 	Taxes	 	 	15	 
	 
	 	2.14.	 	Payments Generally; Treatment	 	 	15	 
	 
	 	2.15.	 	Assumption  of this Agreement or Cancellation of Letters of Credit	 	 	16	 
	SECTION 3.	 	COLLATERAL	 	 	16	 
	 
	 	3.01.	 	Cash Collateral	 	 	16	 
	 
	 	3.02.	 	Currency Exchange Rate Fluctuations	 	 	17	 
	SECTION 4.	 	CONDITIONS PRECEDENT TO EACH CREDIT EVENT	 	 	17	 
	 
	 	4.01.	 	Execution of Agreement	 	 	17	 
	 
	 	4.02.	 	Sufficient Collateral	 	 	17	 
	 
	 	4.03.	 	No Default; Representations and Warranties	 	 	17	 
	 
	 	4.04.	 	Opinion of Counsel	 	 	17	 
	 
	 	4.05.	 	Corporate Documents; Proceedings	 	 	17	 
	 
	 	4.06.	 	Payment of Fees	 	 	18	 
	 
	 	4.07.	 	Letter of Credit Request	 	 	18	 
	 
	 	4.08.	 	The Orders	 	 	18	 
	 
	 	4.09.	 	Documents	 	 	19	 
	 
	 	4.10.	 	Release of Liens on Collateral	 	 	19	 







 









 







	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page

	SECTION 5.	 	REPRESENTATIONS, WARRANTIES AND AGREEMENTS	 	 	19	 
	 
	 	5.01.	 	Corporate Status	 	 	19	 
	 
	 	5.02.	 	Corporate Power and Authority	 	 	20	 
	 
	 	5.03.	 	No Violation	 	 	20	 
	 
	 	5.04.	 	Governmental Approvals	 	 	20	 
	 
	 	5.05.	 	Litigation	 	 	20	 
	 
	 	5.06.	 	True and Complete Disclosure	 	 	20	 
	 
	 	5.07.	 	Tax Returns and Payments	 	 	21	 
	 
	 	5.08.	 	Compliance with Statutes, etc.	 	 	21	 
	 
	 	5.09.	 	Investment Company Act	 	 	21	 
	 
	 	5.10.	 	Properties	 	 	21	 
	 
	 	5.11.	 	Financial Condition; No Material Adverse Change	 	 	21	 
	 
	 	5.12.	 	Use of Proceeds	 	 	22	 
	 
	 	5.13.	 	The Orders	 	 	22	 
	 
	 	5.14.	 	Security Interests	 	 	22	 
	SECTION 6.	 	AFFIRMATIVE COVENANTS	 	 	22	 
	 
	 	6.01.	 	Financial Statements	 	 	22	 
	 
	 	6.02.	 	Certificates; Other Information	 	 	23	 
	 
	 	6.03.	 	Maintenance of Existence; Compliance	 	 	23	 
	 
	 	6.04.	 	Notices	 	 	23	 
	 
	 	6.05.	 	Books, Records and Inspections	 	 	24	 
	 
	 	6.06.	 	Taxes	 	 	24	 
	SECTION 7.	 	NEGATIVE COVENANTS	 	 	24	 
	 
	 	7.01.	 	Amendment to Plan	 	 	24	 
	 
	 	7.02.	 	Liens	 	 	24	 
	 
	 	7.03.	 	Collateral Requirement	 	 	24	 
	SECTION 8.	 	EVENTS OF DEFAULT	 	 	24	 
	SECTION 9.	 	MISCELLANEOUS	 	 	26	 
	 
	 	9.01.	 	Right of Setoff	 	 	26	 
	 
	 	9.02.	 	Notices	 	 	26	 
	 
	 	9.03.	 	Expenses; Indemnity	 	 	26	 
	 
	 	9.04.	 	Benefit of Agreement	 	 	28	 
	 
	 	9.05.	 	No Waiver; Remedies Cumulative	 	 	28	 
	 
	 	9.06.	 	Calculations; Computations	 	 	28	 
	 
	 	9.07.	 	Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial	 	 	28	 
	 
	 	9.08.	 	Confidentiality	 	 	29	 
	 
	 	9.09.	 	Counterparts	 	 	29	 
	 
	 	9.10.	 	Headings Descriptive	 	 	30	 





ii


 









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page

	 
	 	9.11.	 	Amendment or Waiver	 	 	30	 
	 
	 	9.12.	 	Survival	 	 	30	 







EXHIBITS




Exhibit A - Form of Interim Order



Exhibit B - Form of Officers’ Certificate of the Borrower


iii


 









 








     LETTER OF CREDIT REIMBURSEMENT AGREEMENT (this “Agreement”), dated as of
April 2, 2004, between Space Systems/Loral, Inc. (the “Borrower”), a
corporation existing under the laws of the State of Delaware and a debtor and
debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code
(as defined below), and JPMorgan Chase Bank, a New York banking corporation
(the “Bank”).



W I T N E S S E T H :




     WHEREAS, on July 15, 2003 (the “Petition Date”), the Borrower and certain
of its affiliates filed voluntary petitions for relief in the United States
Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”)
under Chapter 11 of the Bankruptcy Code, Case No. 03-41710 (RDD) (the
“Bankruptcy Proceeding”);



     WHEREAS, the Borrower has requested that the Bank make available to it a
letter of credit facility to issue letters of credit in an aggregate face
amount not to exceed $20,000,000 at any one time to provide credit support in
connection with (x) bids made by the Borrower for contracts to build satellites
and related components and (y) general corporate purposes, including, without
limitation, workers’ compensation obligations;



     WHEREAS, to provide security for the reimbursement of any drawing of a
Letter of Credit and the payment of the other Obligations of the Borrower, the
Borrower will provide to the Bank (all as more fully described in this
Agreement and the Cash Collateral Agreement): (i) pursuant to Section
364(c)(1), a superpriority administrative expense claim in the Bankruptcy
Proceeding, having priority over all administrative expenses of the kind
specified in Sections 503(b) and 507(b) of the Bankruptcy Code and (ii)
pursuant to Section 364(c)(2) of the Bankruptcy Code, a perfected first
priority Lien on, and security in, all of the Collateral, including the Cash
Collateral Account;



     WHEREAS, upon consummation of the Plan and pursuant to the Confirmation
Order, the letter of credit facility described herein may be assumed by the
Borrower, as a reorganized debtor, for the issuance (or the amendment, renewal
or extension) of Letters of Credit after the Plan Effective Date; and



     WHEREAS, subject to and upon the terms and conditions set forth herein,
the Bank is willing to issue Letters of Credit, all as provided for herein;



     NOW, THEREFORE, IT IS AGREED:



     Section 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION.



     1.01. Defined Terms. As used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):



     “Additional Credit” shall have the meaning assigned thereto in Section
4.08(b).



 









 





     “Affiliate” shall mean, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.



     “Agreement” shall mean this Letter of Credit Reimbursement Agreement, as
amended, supplemented or otherwise modified from time to time.



     “Alternative Currency” shall mean Euros or Yen.



     “Alternative Currency Letter of Credit” shall mean any Letter of Credit
having a face amount denominated in an Alternative Currency.



     “Assumption Agreement” shall have the meaning provided in Section 2.15.



     “Availability Period” shall mean the period from and including the Closing
Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitment.



     “Bank” shall have the meaning provided in the preamble.



     “Bankruptcy Code” shall mean Title 11 of the United States Code, 11 U.S.C.
§§ 101 et seq., as now or hereafter in effect, or any successor thereto.



     “Bankruptcy Court” shall mean the United States Bankruptcy Court for the
Southern District of New York or any other court having jurisdiction over the
Bankruptcy Proceeding from time to time.



     “Bankruptcy Proceeding” shall mean the Borrower’s Chapter 11 case pending
in the Bankruptcy Court.



     “Bid Bonds” shall mean bonds or other credit support provided by the
Borrower in respect of bids made by the Borrower for contracts to build
satellites and related components.



     “Borrower” shall have the meaning provided in the preamble.



     “Business Day” shall mean any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by
law to remain closed.



     “Cash Collateral Account” shall have the meaning provided in the Cash
Collateral Agreement.



     “Cash Collateral Agreement” shall mean the Cash Collateral Agreement,
dated as of even date herewith, between the Borrower and the Bank, as amended,
supplemented or otherwise modified from time to time.



     “Change in Law” shall mean (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by the Bank (or, for
purposes of Section 2.13(b), by any lending office of the Bank’s



 









 





holding company, if any) with any request, guideline or directive (whether
or not having the force of law) of any Governmental Authority made or issued
after the date of this Agreement.



     “Closing Date” shall mean the date on which all of the conditions set
forth in Section 5 shall have been satisfied.



     “Code” shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated thereunder and the rulings based
thereon. Section references to the Code are to the Code, as in effect at the
date of this Agreement, and to any subsequent provisions of the Code,
amendatory thereof, supplemental thereto or substituted therefor.



     “Collateral” shall have the meaning assigned thereto in the Cash
Collateral Agreement.



     “Committee” shall mean the Official Committee of Unsecured Creditors
appointed by the Office of the United States Trustee on July 24, 2003.



     “Commitment” shall mean the commitment of the Bank hereunder to issue
Letters of Credit, as it may be reduced from time to time pursuant to Section
2.09. The amount of the Commitment on the Closing Date is $20,000,000.



     “Confirmation Order” shall mean any final order of the Bankruptcy Court
confirming a Plan pursuant to Section 1129 of the Bankruptcy Code.



     “Control” shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.



     “Credit Documents” shall mean this Agreement and the Cash Collateral
Agreement.



     “Credit Event” shall mean the issuance, amendment, renewal or extension of
any Letter of Credit.



     “Default” shall mean any event, act or condition specified in Section 8,
which with notice or lapse of time, or both, would, unless cured or waived,
constitute an Event of Default.



     “Dollars” and the symbol “$” shall each mean freely transferable lawful
money of the United States.



     “Dollar Equivalent” shall mean of any amount, at the time of determination
thereof, (a) if such amount is expressed in Dollars, such amount, and (b) if
such amount is expressed in an Alternative Currency, (i) for purposes of
determining the amount of a Reimbursement Obligation, such amount shall be
determined at the time that the Bank makes the



 









 





LC Disbursement giving rise to such Reimbursement Obligation and (ii) in
all other cases, the equivalent of such amount in Dollars determined using the
rate of exchange quoted by JPMorgan Chase Bank in New York, New York at 11:00
a.m. (New York time) on the date of determination to prime banks in New York
for the spot purchase in the New York foreign exchange market of such amount of
Dollars with such Alternative Currency.



     “Drawing Document” shall mean any draft or other document presented for
purposes of demanding payment under a Letter of Credit.



     “EMU Legislation” shall mean the legislative measures of the European
Union for introduction of, changeover to or operation of the euro in one or
more Participating Member States.



     “Euro”
and the symbol “€” shall mean the single currency of
Participating Member States introduced in accordance with the provision of
Article 123 of the Treaty and, in respect of all payments to be made under this
Agreement in Euro, means immediately available, freely transferable funds in
such currency.



     “Event of Default” shall have the meaning provided in Section 8.



     “Excluded Taxes” shall mean, with respect to the Bank, (a) Taxes that are
imposed on its overall net income by the United States, Taxes that are imposed
on its overall net income (and franchise taxes imposed in lieu thereof) by the
jurisdiction under the laws of which the Bank is organized, Taxes that are
imposed on its overall net income (and franchise taxes imposed in lieu thereof)
by the jurisdiction in which the Bank’s Payment Office is located or (b) in the
event that payments are made under the Credit Documents to a jurisdiction
outside the United States, any United States withholding taxes payable with
respect to such payments under the Credit Documents under laws (including any
statute, treaty or regulation) in effect on the Closing Date (but excluding any
United States withholding taxes payable as a result of any Change in Law
occurring after the Closing Date) and any similar tax imposed by any other
jurisdiction in which the Bank is located.



     “Federal Funds Effective Rate” shall mean, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day that is a Business Day, the average (rounded upwards,
if necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Bank from three federal funds brokers of
recognized standing selected by it.



     “Fees” shall mean all amounts payable pursuant or referred to in Section
2.10.



     “Final Order” shall mean an order of the Bankruptcy Court entered in the
Bankruptcy Proceeding, in substantially the form of the Interim Order, with
such modifications thereto as are reasonably satisfactory to the Bank.



 









 





     “Good Faith” shall mean honesty in fact in the conduct of the transaction
concerned.



     “Governmental Authority” shall mean the government of the United States of
America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.



     “Indemnified Taxes” shall mean Taxes other than Excluded Taxes.



     “Instructions” has the meaning given to it in Section 2.02.



     “Interim Order” shall mean an order of the Bankruptcy Court granting
interim approval of the transactions contemplated by this Agreement and the
other Credit Documents and granting the Liens and the Superpriority Claims as
provided in Section 2.04 in favor of the Bank, substantially in the form of
Exhibit A hereto, or otherwise in form and substance reasonably satisfactory to
the Bank.



     “ISP” shall mean International Standby Practices 1998 (International
Chamber of Commerce Publication Number 590) and any subsequent revision thereof
adhered to by the Bank.



     “LC Disbursement” shall mean a payment made by the Bank pursuant to a
Letter of Credit.



     “LC Exposure” shall mean, at any time, the Dollar Equivalent of the sum of
(a) the aggregate undrawn amount of all outstanding Letters of Credit at such
time plus (b) the aggregate amount of all LC Disbursements that have not yet
been reimbursed by or on behalf of the Borrower at such time.



     “Letter of Credit” shall mean any letter of credit issued for the account
of the Borrower pursuant to Section 2.01, which letter of credit shall be (i) a
standby letter of credit, (ii) issued for the purposes permitted by Section
5.12, (iii) denominated in Dollars or an Alternative Currency, and (iv)
otherwise in such form as may be approved by the Bank.



     “Letter of Credit Application” shall mean an application submitted to the
Bank by the Applicant requesting the opening of a Letter of Credit.



     “Lien” shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any other
similar recording or notice statute, and any lease having substantially the
same effect as any of the foregoing).



 









 





     “Material Adverse Effect” shall mean a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise,
of the Borrower and the Subsidiaries taken as a whole, (b) the ability of the
Borrower to perform any of its obligations under this Agreement or (c) the
rights of or benefits available to the Bank under this Agreement or the Credit
Documents.



     “Maturity Date” shall mean April 6, 2006.



     “Notice Office” shall mean the collective reference to the following three
offices or such other office as the Bank may hereafter designate in writing:
(i) JPMorgan Chase Bank, Special Loan Group, 270 Park Avenue,
20th Floor, New
York, New York 10017, Attn: Anna Marie Greer; (ii) JPMorgan Treasury Services,
Global Trade Services, Standby Production, 10420 Highland Manor Dr. (Bl. 2,
Floor 4), Tampa Bay, Florida 33610, Attn: James Alonzo; and (iii) JPMorgan
Chase Bank, Global Credit Operations, 575 Washington Blvd, Floor 21, Jersey
City, New Jersey 07310, Attn: Douglas Ogle.



     “Obligations” shall mean the collective reference to the unpaid amount of
Reimbursement Obligations and all other obligations and liabilities of the
Borrower (including, without limitation, interest accruing at the then
applicable rate provided in this Agreement after the maturity of the
Reimbursement Obligations and interest accruing at the then applicable rate
provided in this Agreement after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating
to the Borrower (other than the Bankruptcy Proceeding), whether or not a claim
for post-filing or post-petition interest is allowed in such proceeding) to the
Bank, whether direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, which may arise under, out of, or in
connection with, this Agreement, or the other Credit Documents, or any Letter
of Credit, or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the
Bank that are required to be paid by the Borrower pursuant to the terms of any
of the foregoing agreements, and all Fees).



     “Orders” shall mean the collective reference to the Interim Order and the
Final Order.



     “Other Taxes” shall mean any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement.



     “Participating Member State” shall mean a member of the European
Communities that adopts or has adopted the Euro as its currency in accordance
with EMU Legislation.



     “Payment Office” shall mean the Bank’s office located at JPMorgan Treasury
Services, Global Trade Services, Standby Production, 10420 Highland Manor Dr.
(Bl. 2, Floor 4), Tampa Bay, Florida 33610, Attn: James Alonzo.



 









 





     “Person” shall mean any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.



     “Plan” shall mean a Chapter 11 plan of reorganization which shall provide,
among other things, for the cancellation of the Letters of Credit issued and
outstanding hereunder and the payment in full of the Obligations or the
execution of the Assumption Agreement in accordance with Section 2.15(a).



     “Plan Effective Date” shall mean the date as of which the conditions
precedent to effectiveness set forth in the Plan have been satisfied or waived
in accordance therewith.



     “Quarterly Payment Date” shall mean the last Business Day of each March,
June, September and December.



     “Regulation D” shall mean Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.



     “Reimbursement Obligation” shall mean the obligation of the Borrower to
reimburse to the Bank any LC Disbursements pursuant to Section 2.05.



     “Requirement of Law” shall mean as to any Person, the Articles of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person
or any of its property is subject.



     “Standard Letter of Credit Practice” shall mean, for the Bank, any
domestic or foreign law or letter of credit practices applicable in the city in
which the Bank issued the Letter of Credit or for its branch or correspondent,
such laws and practices applicable in the city in which it has advised or
negotiated the Letter of Credit, as the case may be. Such practices shall be
those of (i) banks that regularly issue letters of credit in the particular
city and (ii) required or permitted under the ISP or the UCP, as applicable.



     “subsidiary” shall mean, with respect to any Person (the “parent”) at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent’s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as
any other corporation, limited liability company, partnership, association or
other entity (a) of which securities or other ownership interests representing
more than 50% of the equity or more than 50% of the ordinary voting power or,
in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held, or (b) that is, as
of such date, otherwise Controlled, by the parent or one or more subsidiaries
of the parent or by the parent and one or more subsidiaries of the parent.



     “Subsidiary” shall mean any subsidiary of the Borrower.



 









 





     “Superpriority Claim” shall mean a claim against the Borrower in the
Bankruptcy Proceeding which is an administrative expense claim having priority
over any or all administrative expenses of the kind in Sections 503(b) or
507(b) of the Bankruptcy Code, including a claim pursuant to Section 364(c)(1)
of the Bankruptcy Code.



     “Taxes” shall mean any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.



     “UCC” shall mean the Uniform Commercial Code as from time to time in
effect in the relevant jurisdiction.



     “UCP” shall mean the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500 and any
subsequent revision thereof adhered to by the Bank.



     “United States” and “U.S.” shall each mean the United States of America.



     “Yen” and the symbol “¥” shall mean freely transferable and lawful money
of Japan.



     1.02. Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”. The word
“will” shall be construed to have the same meaning and effect as the word
“shall”. Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth
herein), (b) any reference herein to any Person shall be construed to include
such Person’s successors and assigns, (c) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words “asset” and “property” shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.



     1.03. Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the
Borrower notifies the Bank that the Borrower requests an amendment to any
provision hereof to eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof on the operation of such provision
(or if the Bank notifies the Borrower that the Bank requests an amendment to
any provision hereof for such purpose), regardless of whether any such notice
is given before or after such change in GAAP or in the application thereof,
then such provision shall be interpreted on the basis of



 









 





GAAP as in effect and applied immediately before such change shall have
become effective until such notice shall have been withdrawn or such provision
amended in accordance herewith.



     Section 2. LETTERS OF CREDIT.



     2.01. General. Subject to the terms and conditions set forth herein, the
Borrower may request the issuance of Letters of Credit denominated in Dollars
or an Alternative Currency in support of its obligations by delivering a Letter
of Credit Application, at any time and from time to time during the
Availability Period and, subject to the terms and conditions set forth herein
and any other legal or regulatory requirements applicable to the Bank, the Bank
shall issue such Letters of Credit; provided that no Letter of Credit shall be
issued if after giving effect to such issuance (i) the aggregate LC Exposure
would exceed the lesser of (x) the Commitments and (y) the amount permitted to
be outstanding hereunder pursuant to the Interim Order (or the Final Order, as
applicable) and (ii) the aggregate LC Exposure in respect of Letters of Credit
denominated in an Alternative Currency would exceed $12,000,000. For purposes
of determining compliance with this Section 2.01, the LC Exposure for each
Alternative Currency Letter of Credit shall be at the time of issuance thereof
the amount equal to 110% of the Dollar Equivalent of the face amount of such
Alternative Currency Letter of Credit. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and conditions
of any Letter of Credit Application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the Bank relating to any
Letter of Credit, the terms and conditions of this Agreement shall control.



     2.02. Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
deliver (or transmit by electronic communication, if arrangements for doing so
have been approved by the Bank) to the Bank two (2) Business Days in advance of
the requested date of issuance, amendment, renewal or extension) a Letter of
Credit Application requesting the issuance of a Letter of Credit, or a notice
identifying the Letter of Credit to be amended, renewed or extended, and
specifying the requested date of issuance, amendment, renewal or extension
(which shall be a Business Day), of the date on which such Letter of Credit is
to expire (which shall comply with Section 2.03), the face amount of such
Letter of Credit, the name and address of the beneficiary thereof, a
description of the transaction to be supported by such Letter of Credit and
such other information (collectively, the “Instructions”) as shall be necessary
to prepare, amend, renew or extend such Letter of Credit. Absent manifest
error, the Bank’s records of the content of any Instruction shall be
conclusive. A Letter of Credit shall be issued, amended, renewed or extended
only if (and upon issuance, amendment, renewal or extension of each Letter of
Credit the Borrower shall be deemed to represent and warrant that), after
giving effect to such issuance, amendment, renewal or extension, the aggregate
LC Exposure shall not exceed any of the limits specified in the proviso in
Section 2.01 and the conditions of Section 4 are satisfied. Promptly after
issuing any Letter of Credit, the Bank will provide the Borrower with a copy
thereof. Each request for an issuance, amendment, renewal or extension of a
Letter of Credit shall be irrevocable unless modified or rescinded by the
Borrower prior to 10:00 a.m. (New York City time) on the proposed date of
issuance, amendment, renewal or extension specified in the Borrower’s request.



 









 





     2.03. Expiration Date. Each Letter of Credit shall expire at or prior to
the close of business on the earlier of (i) the date one year after the date of
the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Maturity Date; provided that any Letter
of Credit with a one-year term may provide for an annual renewal if such
renewal is consented to by the Bank and all conditions precedent specified in
Section 4 are met at the time of such renewal.



     2.04. Priority and Liens. The Borrower hereby covenants, represents and
warrants that, upon entry of the Interim Order (or the Final Order, as
applicable), and as to all Obligations, such Obligations: (i) pursuant to
Section 364(c)(1) of the Bankruptcy Code, shall at all times constitute allowed
Superpriority Claims in the Bankruptcy Proceeding and (ii) pursuant to Section
364(c)(2) of the Bankruptcy Code, shall at all times be secured by a perfected
first priority Lien on all Collateral maintained in the Cash Collateral Account
and any investments of the funds contained therein.



     2.05. Reimbursement.



     (a) If the Bank shall make any LC Disbursement in respect of a Letter of
Credit, the Borrower shall reimburse the Bank for such LC Disbursement by
paying directly to the Bank in immediately available funds an amount in
Dollars, equal to such LC Disbursement or, in the case of an LC Disbursement in
respect of an Alternative Currency Letter of Credit, in the Dollar Equivalent
thereof, plus any taxes, fees, charges or other costs or expenses incurred by
the Bank in connection with such payment which are obligations of the Borrower
hereunder (the amounts described in the foregoing clauses (a) and (b) in
respect of any drawing, collectively, the “Payment Amount”) on (i) the Business
Day on which the Borrower receives notice from the Bank of an LC Disbursement,
if such notice is received on such Business Day prior to 10:00 A.M., New York
City time, or (ii) if clause (i) above does not apply, the Business Day
immediately following the day on which the Borrower receives such notice. Each
such payment shall be made to the Bank at the Payment Office. Interest shall
be payable on each Payment Amount from the date of the applicable drawing until
the Business Day next succeeding the date of the relevant notice at the Federal
Funds Effective Rate and, thereafter until payment in full of the Payment
Amount, at the rate set forth in Section 2.11.



     (b) Unless the Borrower has reimbursed the Bank in accordance with clause
(a) above or otherwise advised the Bank in writing, prior to 3:00 P.M, New York
City time on the date that any Reimbursement Obligation is due, that the
Borrower will satisfy such Reimbursement Obligation by making a payment to the
Bank prior to 10:00 a.m. (New York City time) of the next Business Day in
accordance with Section 2.05(a) above, the Borrower authorizes the Bank upon
any drawing under any Letter of Credit, and the Bank is hereby authorized and
directed, without notice to any Person or further order of or application to
the Bankruptcy Court, to withdraw Collateral from the Cash Collateral Account
in an amount equal to such Reimbursement Obligation in satisfaction thereof
(with any losses upon liquidation of any investments required to make such
transfer being for the account of the Borrower).



 









 





     2.06. Obligations Absolute; Limitation of Liability. (a) The Borrower’s
obligation to reimburse LC Disbursements, and the Bank’s rights to apply
Collateral to such Obligations, as provided in Section 2.05 and in the Cash
Collateral Agreement shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of this Agreement and
the Cash Collateral Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit, this Agreement or the Cash Collateral Agreement, or any term or
provision therein, (ii) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect, (iii) payment by
the Bank under a Letter of Credit against presentation of a draft or other
document that does not comply with the terms of such Letter of Credit, (iv)
payment against presentation of any Drawing Document which is signed, issued or
presented by a Person (or a transferee of such Person) purporting to be a
successor or transferee of the beneficiary of the Letter of Credit; (v) the
Bank or any of its branches or affiliates being the beneficiary of the Letter
of Credit; (vi) the Bank or any correspondent honoring a drawing against a
Drawing Document up to the amount available under the Letter of Credit even if
such Drawing Document claims an amount in excess of the amount available under
the Letter of Credit; (vii) the existence of any claim, set-off, defense or
other right that the Borrower or any other Person may have at any time against
any beneficiary, any assignee of proceeds, the Bank or any other Person; (viii)
the Bank or any correspondent having previously paid against fraudulently
signed or presented Drawing Documents (whether or not the Borrower reimbursed
the Bank for such drawing); (ix) any appeal, reversal or modification of the
Order or (x) any other event or circumstance whatsoever, whether or not similar
to any of the foregoing, that might, but for the provisions of this Section,
constitute a legal or equitable discharge of, or provide a right of setoff
against, the Borrower’s obligations hereunder.



     (b) Neither the Bank nor any of its Affiliates, shall have any liability
or responsibility by reason of or in connection with the issuance or transfer
of any Letter of Credit or any payment or failure to make any payment
thereunder (irrespective of any of the circumstances referred to in clause (a)
above), or for any error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication under or relating to
any Letter of Credit (including any document required to make a drawing
thereunder), any error in interpretation of technical terms or any consequence
arising from causes beyond the control of the Bank; provided that the foregoing
shall not be construed to excuse the Bank from liability to the Borrower to the
extent of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the Borrower to the extent permitted by
applicable law) suffered by the Borrower that are caused by the Bank’s failure
to exercise care when determining whether drafts and other documents presented
under a Letter of Credit comply with the terms thereof. The parties hereto
expressly agree that, in the absence of gross negligence or willful misconduct
on the part of the Bank (as finally determined by a court of competent
jurisdiction), the Bank shall be deemed to have exercised care in each such
determination. In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, the Bank may, in its sole discretion, either accept and make
payment upon such documents without responsibility for further investigation,
regardless of any notice or



 









 





information to the contrary, or refuse to accept and make payment upon
such documents if such documents are not in strict compliance with the terms of
such Letter of Credit.



     (c) Without limiting any other provision of this Agreement, the Bank: (i)
may (but shall not be obligated to) honor a presentation under a Letter of
Credit which on its face substantially complies with the terms of the Letter of
Credit; (ii) may honor a presentation of any Drawing Documents which appear on
their face to have been signed, presented or issued (X) by any purported
successor or transferee of any beneficiary or other party required to sign,
present or issue the Drawing Documents or (Y) under a new name of the
beneficiary; (iii) shall not be responsible for the identity or authority of
any presenter or signer of any Drawing Document or the form, accuracy,
genuineness, or legal effect of any presentation under any Letter of Credit or
of any Drawing Documents; (iv) may (but shall not be obligated to) disregard
any non-documentary conditions stated in any Letter of Credit; (v) may act upon
any Instruction which it, in Good Faith believes to have been given by a Person
or entity authorized to give such Instruction; (vi) shall not be responsible
for any errors, omissions, interruptions or delays in transmission or delivery
of any message, advice or document, (regardless of how sent or transmitted) or
for errors in interpretation of technical terms or in translation; (vii) shall
not be responsible for any acts, omissions or fraud by, or the solvency of, any
beneficiary, any nominated Person or any other Person; (viii) may assert or
waive any provision of the UCP or ISP which primarily benefits an issuing bank
of a letter of credit, including, any requirement that any Drawing Document be
presented to it at a particular hour or place; (ix) may pay any paying or
negotiating bank (designated or permitted by the terms of any Letter of Credit)
claiming that it rightfully honored or is entitled to reimbursement or
indemnity under the Standard Letter of Credit Practice applicable to it; and
(x) may act or not act as required or permitted under Standard Letter of Credit
Practice applicable to it where it has issued, confirmed, advised or negotiated
the Letter of Credit, as the case may be.



     (d) The Borrower shall notify the Bank of (i) any noncompliance with any
Instruction, any other irregularity with respect to the text of the Letter of
Credit or any amendment thereto or any claim of an unauthorized, fraudulent or
otherwise improper Instruction, within one (1) Business Day prior to the
issuance or amendment of any Letter of Credit and (ii) subject to the
limitations of liability of the Bank in Section 5-109 of the UCC, any objection
the Borrower may have to the Bank’s honor or dishonor of any presentation under
the Letter of Credit or any other action or inaction taken or proposed to be
taken by the Bank under or in connection with this Agreement or any Letter of
Credit, within three (3) Business Days after the Borrower receives notice of
the objectionable action or inaction. The failure to so notify the Bank within
said times shall discharge the Bank from any loss or liability that the Bank
could have avoided or mitigated had it received such notice, to the extent that
the Bank could be held liable for damages hereunder; provided that, if the
Borrower shall not provide such notice to the Bank within three (3) Business
Days of the date of receipt in the case of clause (i) or ten (10) Business Days
from the date of receipt of clause (ii), then the Bank shall have no liability
whatsoever for such noncompliance, irregularity, action or inaction and the
Borrower shall be precluded from raising such noncompliance, irregularity or
objection as a defense or claim against the Bank. The Borrower’s acceptance or
retention of any Drawing Documents presented under or in connection with a
Letter of Credit (whether or not the document is genuine) shall ratify the
Bank’s honor of the presentation and preclude the Borrower from raising a
defense, set-



 









 





off or claim with respect to the Bank’s honor of the Letter of Credit.
The Bank shall not be required to seek any waiver of discrepancies from the
Borrower or to grant any waiver of discrepancies that the Borrower approves or
Instructions.



     2.07. Practices. Letters of Credit shall be subject to the ISP, or, if
specified in Part I of the Letter of Credit Application, the UCP.



     2.08. Disbursement Procedures. The Bank shall, following its receipt
thereof, examine all documents purporting to represent a demand for payment
under a Letter of Credit. The Bank shall promptly notify the Borrower by
telephone (confirmed by telecopy) of such demand for payment and whether the
Bank has made or will make an LC Disbursement thereunder; provided that any
failure to give or delay in giving such notice shall not relieve the Borrower
of its obligation to reimburse the Bank with respect to any such LC
Disbursement.



     2.09. Termination and Reduction of Commitment. (a) Unless previously
terminated, the Commitment shall terminate on the Maturity Date.



     (b) The Borrower may at any time terminate, or from time to time reduce,
the Commitment; provided that (i) each reduction of the Commitment shall be in
an amount that is an integral multiple of $1,000,000 and not less than
$5,000,000 and (ii) the Borrower shall not terminate or reduce the Commitment
if the then-current LC Exposure or any of the sublimits set forth in Section
2.01 would exceed the Commitment.



     (c) The Borrower shall notify the Bank of any election to terminate or
reduce the Commitment under paragraph (b) of this Section at least three
Business Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof. Each notice delivered
by the Borrower pursuant to this Section shall be irrevocable. Any termination
or reduction of the Commitment shall be permanent.



     2.10. Fees. (a) The Borrower agrees to pay to the Bank a facility fee,
which shall accrue at the rate of .05% per annum on the daily amount of the
Commitment (whether used or unused) during the period from and including the
date hereof to but excluding the date on which the Obligations are paid in
full. Accrued facility fees shall be payable in arrears on each Quarterly
Payment Date and on the date on which the Commitment terminates, commencing on
the first such date to occur after the date hereof; provided that any facility
fees accruing after the date on which the Commitment terminates shall be
payable on demand. All facility fees shall be computed on the basis of a year
of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).



     (b) The Borrower shall pay to the Bank a fee for the issuance, renewal,
extension or amendment of a Letter of Credit in an amount equal to 0.25% of the
face amount of such Letter of Credit, to be paid upon the date of issuance,
renewal, extension or amendment of each Letter of Credit.



     (c) On or before the Closing Date, the Borrower shall pay to the Bank an
arrangement fee of $100,000.



 









 





     (d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Bank. Fees paid shall not be refundable
under any circumstances.



     2.11. Default Rate of Interest. If any fee or other amount payable by the
Borrower hereunder is not paid when due, whether at stated maturity, upon
acceleration or otherwise, such overdue amount shall bear interest, after as
well as before judgment, at a rate per annum equal to 2% plus the Federal Funds
Effective Rate.



     2.12. Increased Costs. (a) If any Change in Law shall:




     (i) impose, modify or deem applicable any reserve, special deposit
or similar requirement against assets of, deposits with or for the
account of, or credit extended by the Bank; or




     (ii) impose on the Bank any other condition affecting this Agreement
or any Letter of Credit or participation therein;



and the result of any of the foregoing shall be to increase the cost to the
Bank of issuing or maintaining any Letter of Credit or to reduce the amount of
any sum received or receivable by the Bank hereunder (whether of principal,
interest or otherwise), then the Borrower will pay to the Bank such additional
amount or amounts as will compensate the Bank for such additional costs
incurred or reduction suffered.



     (b) If the Bank shall determine that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on the
Bank’s capital or on the capital of the Bank’s holding company as a consequence
of this Agreement or the Letters of Credit issued by the Bank, to a level below
that which the Bank or the Bank’s holding company could have achieved but for
such Change in Law (taking into consideration the Bank’s policies and the
policies of the Bank’s holding company with respect to capital adequacy), then
from time to time the Borrower will pay to the Bank, such additional amount or
amounts as will compensate the Bank or the Bank’s holding company for any such
reduction suffered.



     (c) A certificate of the Bank setting forth the amount or amounts
necessary to compensate the Bank or its holding company as specified in
paragraph (a) or (b) of this Section shall be delivered to the Borrower and
shall be conclusive absent manifest error. The Borrower shall pay the Bank the
amount shown as due on any such certificate within 20 days after receipt
thereof.



     (d) Failure or delay on the part of the Bank to demand compensation
pursuant to this Section shall not constitute a waiver of the Bank’s right to
demand such compensation; provided that the Borrower shall not be required to
compensate the Bank pursuant to this Section for any increased costs or
reductions incurred more than 270 days prior to the date that the Bank notifies
the Borrower of the Change in Law giving rise to such increased costs or
reductions and of the Bank’s intention to claim compensation therefor; provided
further that, if the Change in Law giving rise to such increased costs or
reductions is retroactive, then the 270-day period referred to above shall be
extended to include the period of retroactive effect thereof.



 









 





     2.13. Taxes. (a) Any and all payments by or on account of any obligation
of the Borrower hereunder shall be made free and clear of and without deduction
for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall
be required to deduct any Indemnified Taxes or Other Taxes from such payments,
then (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section) the Bank receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full amount deducted
to the relevant Governmental Authority in accordance with applicable law.



     (b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.



     (c) The Borrower shall indemnify the Bank within 10 days after written
demand therefor, for the full amount of any Indemnified Taxes or Other Taxes
paid by the Bank on or with respect to any payment by or on account of any
obligation of the Borrower hereunder (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this
Section) and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate as to the amount of such payment or liability
delivered to the Borrower by the Bank shall be conclusive absent manifest
error.



     (d) As soon as practicable after any payment of Indemnified Taxes or Other
Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver
to the Bank the original or a certified copy of a receipt issued by such
Governmental Authority evidencing such payment, a copy of the return reporting
such payment or other evidence of such payment reasonably satisfactory to the
Bank.



     (e) If the Bank determines, in its sole discretion, that it has received a
refund of any Taxes or Other Taxes as to which it has been indemnified by the
Borrower or with respect to which the Borrower has paid additional amounts
pursuant to this Section 2.13, it shall pay over such refund to the Borrower
(but only to the extent of indemnity payments made, or additional amounts paid,
by the Borrower under this Section 2.13 with respect to the Taxes or Other
Taxes giving rise to such refund), net of all out-of-pocket expenses of the
Bank and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund); provided that the
Borrower, upon the request of the Bank, agrees to repay the amount paid over to
the Borrower (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Bank in the event the Bank is required
to repay such refund to such Governmental Authority. This Section shall not be
construed to require the Bank to make available its Tax returns (or any other
information relating to its Taxes which it deems confidential) to the Borrower
or any other person.



     2.14. Payments Generally; Treatment. (a) The Borrower shall make each
payment required to be made by it hereunder (whether of, fees or reimbursement
of LC Disbursements, or of any other amounts payable hereunder, or otherwise)
in immediately



 









 





available funds, without set-off or counterclaim. Any amounts received
after 12:00 noon, New York City time on any date may, in the discretion of the
Bank, be deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. All such payments shall be made to
the Bank at its offices at the Payment Office. If any payment hereunder shall
be due on a day that is not a Business Day, the date for payment shall be
extended to the next succeeding Business Day, and, in the case of any payment
accruing interest, interest thereon shall be payable for the period of such
extension. All payments hereunder shall be made in Dollars.



     (b) If at any time insufficient funds are received by and available to the
Bank to pay fully the aggregate amount of unreimbursed LC Disbursements plus
interest and fees then due hereunder, such funds shall be applied (i) first,
towards payment of interest and fees, and (ii) second, towards payment of
unreimbursed LC Disbursements then due hereunder.



     (c) Subject to the provision of Section 8, upon the maturity (whether by
acceleration or otherwise) of any of the Obligations under this Agreement or
any Credit Document, the Bank shall be entitled to immediate payment of such
Obligations without further application to or order of the Bankruptcy Court.



     2.15. Assumption of this Agreement or Cancellation of Letters of Credit.



     (a) If the Plan Effective Date occurs prior to the expiration of any
Letter of Credit, (i) such Letter of Credit shall be replaced and returned to
the Bank undrawn and marked “cancelled” on or prior to the Plan Effective Date
or (ii) if the Borrower is unable to comply with clause (i) above, the
Borrower, in its capacity as a reorganized Borrower, shall enter into an
assumption agreement to assume this Agreement and the Cash Collateral Agreement
(the “Assumption Agreement”) simultaneously with the occurrence of the Plan
Effective Date in form and substance satisfactory to the Bank, which shall
provide, among other things, that all Obligations hereunder and under the Cash
Collateral Agreement shall be deemed to be Obligations of the reorganized
Borrower and the Collateral shall continue to be maintained in the Cash
Collateral Account pursuant to the terms of this Agreement and the Cash
Collateral Agreement for the benefit of the Bank until all Obligations are paid
in full or each Letter of Credit issued hereunder is returned to the Bank
undrawn and marked “cancelled”.



     (b) If the Maturity Date occurs prior to the expiration of any Letter of
Credit, such Letter of Credit shall be replaced and returned to the Bank
undrawn and marked “cancelled” on or prior to the Maturity Date.



     Section 3. COLLATERAL.



     3.01. Cash Collateral. To secure the prompt payment and performance to
the Bank of the Obligations of the Borrower under the Letters of Credit, the
Borrower has simultaneously herewith entered into the Cash Collateral Agreement
pursuant to which the Borrower grants to the Bank a continuing first priority
security interest, senior to all other Liens, if any, in the Collateral.
Collateral held in the Cash Collateral Account shall not be available for



 









 





use by the Borrower or any of its subsidiaries or affiliates, whether
pursuant to Section 363 of the Bankruptcy Code or otherwise.



     3.02. Currency Exchange Rate Fluctuations.



     (a) In the event that at any time the Borrower determines that by reason
of currency exchange rates any aggregate or individual limits or sublimits set
forth in Section 2.01 have been breached, in each case, by more than 5%, the
Borrower shall immediately notify the Bank (which notice shall promptly be
confirmed in writing). Nothing herein shall obligate the Borrower to monitor
currency exchange rates so as to make such determination but shall comply with
this Section 3.02 and Section 4 of the Cash Collateral Agreement if,
nonetheless, any such determination has been made.



     (b) The Bank will calculate the LC Exposure (including any portion made in
any Alternative Currency) and in any event on each date of receipt of a Letter
of Credit Application or request to amend, renew or extend an outstanding
Letter of Credit and otherwise not less frequently than once each calendar
month.



     (c) In the event that on any date the Bank calculates that by reason of
currency exchange rates any limits set forth in the proviso in Section 2.01
have been breached, in each case, by more than 5%, the Bank shall give notice
to such effect to the Borrower.



     Section 4. CONDITIONS PRECEDENT TO EACH CREDIT EVENT. Each Credit Event
is subject (except and to the extent as hereinafter indicated) to the
satisfaction of the following conditions:



     4.01. Execution of Agreement. The Closing Date shall have occurred.



     4.02. Sufficient Collateral. At the time of each Credit Event and after
giving effect thereto, the Bank shall have received sufficient Collateral in
respect of such Credit Event in accordance with the terms of the Cash
Collateral Agreement.



     4.03. No Default; Representations and Warranties. At the time of each
Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein and in the other Credit Documents shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on and as of the date of such Credit Event, except to
the extent such representations and warranties expressly relate to an earlier
date, in which case such representations and warranties shall be true and
correct in all material respects as of such earlier date.



     4.04. Opinion of Counsel. On the Closing Date, the Bank shall have
received from counsel to the Borrower an opinion addressed to the Bank and
dated the Closing Date in form, scope and substance satisfactory to the Bank.



     4.05. Corporate Documents; Proceedings. (a) On the Closing Date, the
Bank shall have received (i) a certificate, dated the Closing Date, signed by
the Secretary or any



 









 





Assistant Secretary, and attested to by the President, any Vice President
or the Treasurer of the Borrower, in the form of Exhibit B hereto with
appropriate insertions, together with copies of the Certificate of
Incorporation and By-Laws of the Borrower and the resolutions of the Borrower
referred to in such certificate and (ii) a certificate of the Secretary of
State of the State of Delaware certifying the good standing of the Borrower in
such jurisdiction and listing all charter documents of the Borrower on file
therewith.



     (b) All corporate and legal proceedings and all instruments and agreements
in connection with the Transactions shall be satisfactory in form and substance
to the Bank shall have received all information and copies of all documents and
papers, including records of corporate proceedings and governmental approvals,
if any, which the Bank reasonably may have requested in connection therewith,
such documents and papers where appropriate to be certified by proper corporate
or governmental authorities.



     4.06. Payment of Fees. The Borrower shall have paid all costs, fees and
expenses due to the Bank on or prior to the Closing Date (including, without
limitation, reasonable legal fees and expenses due pursuant to Section 9.03) to
the extent due.



     4.07. Letter of Credit Request. Prior to any Credit Event, the Bank shall
have received a request for an extension, amendment or renewal of such Letter
of Credit meeting the requirements of Section 2.02 or a Letter of Credit
Application, such request or Letter of Credit Application to include a
certification by the Borrower that, after giving effect to the issuance,
renewal, amendment or extension of the requested Letter of Credit and the
proposed use of any proceeds thereof, no Default or Event of Default exists.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by the Borrower to the Bank that all the conditions
specified in Section 4.03 exist as of that time.



     4.08. The Orders.



     (a) At the time of the initial Credit Event, the Bank shall have received
a copy of the Interim Order approving the Credit Documents and granting the
Superpriority Claims and Liens described in Section 2.04 and findings that the
Bank is extending credit to the Borrower in good faith within the meaning of
Section 364(e) of the Bankruptcy Code, which Interim Order shall (i) be in form
and substance satisfactory to the Bank, (ii) approve the payment by the
Borrower of all Fees, (iii) be in full force and effect and (iv) not have been
stayed, reversed, vacated, rescinded, modified or amended in any respect and,
if the Interim Order is the subject of a pending appeal in any respect, none of
the Credit Events, the grant of Liens and Superpriority Claims pursuant to
Section 2.04 or the performance by the Borrower of any of its obligations
hereunder or under the other Credit Documents or under any other instrument or
agreement referred to herein shall be the subject of a presently effective stay
pending appeal.



     (b) At the time of any subsequent Credit Events, the Interim Order shall
be in full force and effect and shall not have been stayed, reversed, vacated,
rescinded, modified or amended in any respect; provided that at the time of the
issuance of any Letter of Credit the aggregate amount of which, when added to
the LC Exposure at such time, would exceed the amount authorized by the Interim
Order (the “Additional Credit”), the Bank shall have received a



 









 





certified copy of the Final Order which, in any event, shall have been
entered by the Bankruptcy Court no later than thirty (30) days after the entry
of the Interim Order and, at the time of the extension of any Additional
Credit, the Final Order shall be in full force and effect and shall not have
been stayed, reversed, vacated, rescinded, modified or amended in any respect;
and if either the Interim Order or the Final Order is the subject of a pending
appeal in any respect, none of the Credit Events, the grant of Liens and
Superpriority Claims pursuant to Section 2.04 or the performance by the
Borrower of any of its obligations hereunder or under the other Credit
Documents or under any other instrument or agreement referred to herein shall
be the subject of a presently effective stay pending appeal.



     4.09. Documents. All certificates, legal opinions and other instruments
referred to in this Section 4, unless otherwise specified, shall be delivered
to the Bank and, shall be satisfactory in form and substance to the Bank.



     4.10. Release of Liens on Collateral. The Bank shall have received
evidence reasonably satisfactory to it that (a) any pre-existing Liens,
security interests and encumbrances on the Collateral securing the obligations
(including any adequate protection obligations pursuant to any cash collateral
order entered in the Borrower’s and its affiliates’ Chapter 11 cases) owing to
(i) Bank of America, N.A., as administrative agent and collateral agent to the
lenders (in such capacity, the “SpaceCom Agent”), and the lenders (the
“SpaceCom Lenders”) under the Amended and Restated Credit Agreement, dated as
of December 21, 2001, as amended, with Loral SpaceCom Corporation, as borrower,
and (ii) Bank of America, N.A., as administrative agent and collateral agent to
the lenders (in such capacity, the “Satellite Agent”), and the lenders (the
“Satellite Lenders”) under the Credit Agreement, dated as of November 17, 2000,
as amended, with Loral Satellite, Inc., as borrower, shall have been released
and terminated and (b) the SpaceCom Agent, the SpaceCom Lenders, the Satellite
Agent and the Satellite Lenders shall not have any right, title or interest
whatsoever in any Collateral deposited into the Cash Collateral Account.



     Section 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to induce
the Bank to enter into this Agreement and issue Letters of Credit, the Borrower
makes the following representations and warranties to, and agreements with, the
Bank, all of which shall survive the execution and delivery of this Agreement
and the issuance of any Letter of Credit, with the execution and delivery of
this Agreement and the occurrence of each Credit Event being deemed to
constitute a representation and warranty that the matters specified in this
Section 6 are true and correct on and as of the date of such execution and
delivery and the date of each such Credit Event:



     5.01. Corporate Status. The Borrower (i) is a duly organized and validly
existing corporation in good standing under the laws of the jurisdiction of its
formation or incorporation, (ii) has the power and authority to own its
property and assets and to transact the business in which it is engaged and
(iii) is duly qualified as a foreign company or corporation and in good
standing in each jurisdiction where the failure to so qualify or be in good
standing would have a material adverse effect on such corporation.



 









 





     5.02. Corporate Power and Authority. Upon the entry by the Bankruptcy
Court of the Interim Order (or the Final Order, as applicable), the Borrower
has the corporate power and authority to execute, deliver and perform the terms
and provisions of this Agreement, any Letter of Credit Application or request
for an amendment, renewal or extension of a Letter of Credit, any Instructions
and the Cash Collateral Agreement and has taken all necessary corporate action
to authorize the execution, delivery and performance by it of this Agreement
and the Cash Collateral Agreement. Upon entry by the Bankruptcy Court of the
Interim Order (or the Final Order, as applicable), the Borrower has duly
executed and delivered this Agreement and the Cash Collateral Agreement, and
each of this Agreement, its reimbursement obligations under all Letters of
Credit and the Cash Collateral Agreement constitutes, and any Letter of Credit
Application or request for an amendment, renewal or extension of a Letter of
Credit will constitute, its legal, valid and binding obligation enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by applicable bankruptcy, insolvency, reorganization or other similar laws
affecting creditors’ rights generally and by general equitable principles
(regardless of whether the issue of enforceability is considered in a
proceeding in equity or at law).



     5.03. No Violation. Upon entry by the Bankruptcy Court of the Interim
Order (or the Final Order as applicable), neither the execution, delivery or
performance by the Borrower of this Agreement or the Cash Collateral Agreement,
nor compliance by it with the respective terms and provisions thereof, (i) will
contravene any provision of any law, statute, rule or regulation or any order,
writ, injunction or decree of any court or governmental instrumentality, (ii)
will conflict or be inconsistent with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under,
or result in the creation or imposition of (or the obligation to create or
impose) any Lien (other than pursuant to the Credit Documents) upon any of the
property or assets of the Borrower pursuant to the terms of, any indenture,
mortgage, deed of trust, credit agreement, loan agreement or any other
agreement, contract or instrument to which the Borrower is a party or by which
it or any of its property or assets is bound or to which it may be subject,
including the Plan or (iii) will violate any provision of the by-laws or
Certificate of Incorporation of the Borrower.



     5.04. Governmental Approvals. Upon entry by the Bankruptcy Court of the
Interim Order (or the Final Order, as applicable), no order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with (except as have been obtained or made prior to the Closing Date), or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of this Agreement or the Cash Collateral
Agreement or (ii) the legality, validity, binding effect or enforceability of
this Agreement or the Cash Collateral Agreement.



     5.05. Litigation. Except as publicly or otherwise disclosed to the Bank
prior to the date hereof, there are no actions, suits or proceedings pending
or, to the best knowledge of the Borrower, threatened with respect to any
Credit Document.



     5.06. True and Complete Disclosure. All factual information heretofore or
contemporaneously furnished by or on behalf of the Borrower in writing to the
Bank (including,



 









 





without limitation, all information contained in the Credit Documents) for
purposes of or in connection with this Agreement or any transaction
contemplated herein is true and accurate in all material respects on the date
as of which such information is dated or certified and does not omit to state
any fact necessary to make such information not misleading at such time in
light of the circumstances under which such information was provided, it being
understood that any projections delivered were prepared in Good Faith on
assumptions believed by the Borrower to be appropriate but actual results may
materially differ from the projections.



     5.07. Tax Returns and Payments. The Borrower and its Subsidiaries has
filed all Tax returns required to be filed by it and has paid all income Taxes
payable by it which have become due pursuant to such Tax returns and all other
Taxes and assessments payable by it which have become due, other than those
which (a) are not material, (b) payment of which has been stayed as a result of
the Bankruptcy Proceeding or (c) are being contested in good faith and for
which adequate reserves have been established. Each of the Borrower and its
Subsidiaries has paid, or has provided adequate reserves (in the good faith
judgment of the management of the Borrower) for the payment of, all federal and
state income Taxes applicable for all prior fiscal years and for the current
fiscal year to the date hereof.



     5.08. Compliance with Statutes, etc. Except as a result of the Bankruptcy
Proceeding, the Borrower is in compliance with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls), except such noncompliance as would not, in the aggregate, have a
material adverse effect on the business, operations, property, assets or
financial condition of the Borrower (taking into account the effect of the
automatic stay in the Bankruptcy Proceeding).



     5.09. Investment Company Act. The Borrower is not an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.



     5.10. Properties. (a) The Borrower has good title to, or valid leasehold
interests in, all its real and personal property material to its business,
except for minor defects in title that do not interfere with its ability to
conduct its business as currently conducted or to utilize such properties for
their intended purposes.



     (b) The Borrower owns, or is licensed to use, all trademarks, tradenames,
copyrights, patents and other intellectual property material to its business,
and the use thereof by the Borrower does not infringe upon the rights of any
other Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.



     5.11. Financial Condition; No Material Adverse Change. (a) The Borrower
has heretofore furnished to the Bank its consolidated balance sheet and
statements of income, stockholders equity and cash flows as of and for the
fiscal year ended December 31, 2003, reported on by Deloitte & Touche LLP,
independent public accountants. Such financial statements present fairly, in
all material respects, the financial position and results of operations and



 









 





cash flows of the Borrower and its consolidated Subsidiaries as of such
dates and for such periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of the statements referred
to in clause (ii) above.



     (b) Except as may have been disclosed in the Form 10-K for the year ended
December 31, 2003 of Loral Space & Communications Ltd., since December 31,
2003, there has been no material adverse change in the business, assets,
operations, prospects or condition, financial or otherwise, of the Borrower and
its Subsidiaries, taken as a whole.



     5.12. Use of Proceeds. The Letters of Credit requested hereunder shall be
used only to provide credit support (x) in connection with Bid Bonds and bids
made by the Borrower for contracts to build satellites and related components
and (y) for general corporate purposes, including, without limitation, workers’
compensation obligations.



     5.13. The Orders. As of the date of the submission of a Letter of Credit
Application or the request for a renewal, amendment or extension of a Letter of
Credit, the Interim Order or the Final Order, as applicable, has been entered
and has not been stayed, amended, vacated, reversed, rescinded or otherwise
modified in any respect (except in accordance with the terms hereof).



     5.14. Security Interests. The security interests and the Liens granted
pursuant to this Agreement and the Cash Collateral Agreement, upon the entry of
the Interim Order (or the Final Order, applicable), are (a) valid first
priority security interests in all of the Collateral and the Cash Collateral
Account, as collateral security for the Obligations, enforceable in accordance
with the terms hereof against all creditors of the Borrower and its affiliates
and any Persons purporting to purchase any Collateral from the Borrower and (b)
prior to all other security interests and Liens on the Collateral



     Section 6. AFFIRMATIVE COVENANTS. The Borrower covenants and agrees that
on and after the Closing Date and until the Commitment has terminated, and all
Letters of Credit have terminated and, Fees and all other obligations incurred
hereunder and under the other Credit Documents, are paid in full, the Borrower
shall:



     6.01. Financial Statements. Furnish to the Bank:



     (a) as soon as available, but in any event within 75 days after the end of
each fiscal year of the Borrower, the annual report of Loral Space &
Communications Ltd. on Form 10-K, and for any financial statements and related
materials delivered after the Plan Effective Date, reported on without a “going
concern” or like qualification or exception, or qualification arising out of
the scope of the audit, by Deloitte & Touche LLP or other independent certified
public accountants of nationally recognized standing; and



     (b) as soon as available, but in any event not later than 40 days after
the end of each of the first three quarterly periods of each fiscal year of the
Borrower, the quarterly report of Loral Space & Communications Ltd. reported on
Form 10-Q;.



 









 





     (c) as soon as available, but in any event not later than 35 days after
the end of each month, the Borrower’s monthly operating statements in the form
previously provided to the Bank.



     All such financial statements shall be complete and correct in all
material respects and shall be prepared in reasonable detail and in accordance
with GAAP applied (except as approved by such accountants or officer, as the
case may be, and disclosed in reasonable detail therein) consistently
throughout the periods reflected therein and with prior periods.



     6.02. Certificates; Other Information. Furnish to the Bank:



     (a) concurrently with the delivery of any financial statements pursuant to
Section 6.01, a certificate of a responsible officer of the Borrower stating
that such responsible officer has obtained no knowledge of any Default or Event
of Default except as specified in such certificate;



     (b) promptly, such additional financial and other information as the Bank
may from time to time reasonably request.



     6.03. Maintenance of Existence; Compliance. (a)(i) Preserve, renew and
keep in full force and effect its organizational existence and (ii) take all
reasonable action to maintain all rights, privileges and franchises necessary
or desirable in the normal conduct of its business except, in the case of
clause (ii) above, to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect; and (b) comply with all
Requirements of Law, the noncompliance with which, in the aggregate, could
reasonably be expected to have a Material Adverse Effect of the type set forth
in clauses (b) and (c) of the definition thereof, except for any such
Requirements of Law being contested in good faith by appropriate proceedings.



     6.04. Notices. Promptly give notice to the Bank of:



     (a) the occurrence of any Default or Event of Default;



     (b) any litigation, or proceeding or, to the knowledge of the Borrower,
any investigation that, in each case, may exist at any time between the
Borrower or any of its Subsidiaries or Affiliates and any Governmental
Authority, that if adversely determined, could reasonably be expected to have a
Material Adverse Effect;



     (c) any litigation or proceeding to which the Borrower or any of its
Subsidiaries or Affiliates is a party (i) the primary purpose of which is to
challenge the legality, validity or enforceability of the Credit Documents, or
(ii) seeks to prohibit the ownership or operation by the Borrower or any of its
Subsidiaries or Affiliates of all or a material portion of their respective
businesses or assets; or



     (d) any development or event (other than any litigation or proceeding)
that has had or could reasonably be expected to have a Material Adverse Effect.



 









 





     6.05. Books, Records and Inspections. (a) Keep proper books of record
and account entries in conformity with generally accepted accounting principles
reflecting all dealings and transactions in relation to its business and
activities.



     (a) Permit officers and designated representatives of the Bank to visit
and inspect, under guidance of officers of the Borrower or such Subsidiary, any
of the properties of the Borrower or such Subsidiary, and to examine the books
of record and account of the Borrower or such Subsidiary and discuss the
affairs, finances and accounts of the Borrower or such Subsidiary with, and be
advised as to the same by, its and their officers, all at such reasonable times
and intervals and to such reasonable extent as the Bank may request.



     6.06. Taxes. Pay and discharge or cause to be paid and discharged when
due all Taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits or upon any of its property (real, personal or
mixed), or upon any part thereof; provided, however, that the failure of the
Borrower to pay any such Tax, assessment, charge, levy or claim shall not
constitute a breach of this covenant if (a) such payment is not material or has
been stayed as a result of the Bankruptcy Proceeding or (b) for so long as the
amount, applicability or validity thereof shall concurrently be contested in
good faith by appropriate and timely proceedings diligently conducted, and if
such reserve or other appropriate provision, if any, as shall be required by
generally accepted accounting principles shall have been made therefor, and
neither the Borrower’s nor any such Subsidiary’s title to or right to use of
any of its property is impaired in any material respect by reason of such
contest.



     Section 7. NEGATIVE COVENANTS. The Borrower hereby agrees that, so long
as the Commitments remain in effect, any Letter of Credit remains outstanding
or any other amount is owing to the Bank, the Borrower shall not:



     7.01. Amendment to Plan. Any time prior to the Plan Effective Date, with
respect to any Plan proposed in the Bankruptcy Proceeding, make or consent to
any amendment to the Plan that could be reasonably expected to materially and
adversely affect (i) the ability of the Borrower to perform its obligations
under Section 2.15 or under any of the Credit Documents entered into prior to
the Plan Effective Date or (ii) the rights and remedies of the Bank hereunder
or under any of the Credit Documents or with respect to the Collateral.



     7.02. Liens. Create, incur, assume or suffer to exist any Lien upon any
Collateral, whether now owned or hereafter acquired, except for Liens securing
the Borrower’s obligations to the Bank under this Agreement and the other
Credit Documents.



     7.03. Collateral Requirement. Fail at any time to maintain the Collateral
pursuant to the terms of this Agreement and the Cash Collateral Agreement.



     Section 8. EVENTS OF DEFAULT. Upon the occurrence of any of the following
specified events and the continuance thereof beyond any applicable grace period
(each an “Event of Default”)



 









 





     (a) the Borrower shall (i) default, and such default shall continue for
one or more Business Days, in the payment of any Reimbursement Obligation in
respect of any LC Disbursement when and as the same shall become due and
payable, (ii) default, and such default shall continue unremedied for two or
more Business Days, in the payment when due of any interest on any such amounts
or (iii) default, and such default shall continue unremedied for five or more
Business Days, in payment when due of any Fees or any other amounts owing
hereunder; or



     (b) any representation, warranty or statement made by the Borrower in this
Agreement or in any certificate delivered pursuant hereto or thereto shall
prove to be untrue in any material respect on the date as of which made or
deemed made; or



     (c) the Borrower shall default in the due performance or observance by it
of any term, covenant or agreement contained in (i) this Agreement or the Cash
Collateral Agreement and such default shall continue unremedied for a period of
30 days or (ii) Section 2.15, Section 6.04(a), Section 7 or Section 4 of the
Cash Collateral Agreement; or



     (d) prior to the Plan Effective Date, (i) the Bankruptcy Proceeding shall
be dismissed by order of the Bankruptcy Court, (ii) the Bankruptcy Proceeding
shall be converted to a case under Chapter 7 of the Bankruptcy Code, (iii) a
trustee under Chapter 11 of the Bankruptcy Code shall be appointed in the
Bankruptcy Proceeding or (iv) the Borrower shall filing any pleading seeking or
otherwise consenting to any of the matters set forth in paragraphs (a) through
(c) above;



     (e) an order of the Bankruptcy Court shall be entered reversing, staying
for a period in excess of 10 days, vacating or otherwise amending,
supplementing or modifying the Order without the written consent of the Bank;
or



     (f) an order of the Bankruptcy Court shall be entered and be in effect in
the Bankruptcy Case appointing an examiner having enlarged powers relating to
the operation of the business of the Borrower (i.e., powers beyond those set
forth under Sections 1106(a)(3) and (4) of the Bankruptcy Code) and such order
shall not be reversed or vacated within 30 days after the entry thereof; or



     (g) any material provision of any Credit Document shall, for any reason,
cease to be valid and binding on the Borrower, or the Borrower shall so assert
in any pleading filed in the Bankruptcy Court; or



     (h) the Confirmation Order is stayed, reversed, vacated or otherwise
modified after the date hereof in any manner that could reasonably be expected
to materially and adversely affect the Borrower’s ability to perform its
obligations under the Credit Documents; or



     (i) the Borrower shall file an application seeking, or an order of the
Bankruptcy Court shall be entered, granting another superpriority
administrative expense claim or a Lien on the Collateral pari passu with or
senior to the Superpriority Claims and Liens



 









 





granted to the Bank pursuant to this Agreement and the Interim Order (or
the Final Order, as applicable);



then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, and without further order of or application
to the Bankruptcy Court, the Bank may take any or all of the following actions:
(i) declare the Commitment terminated, whereupon the Commitment of the Bank to
renew, amend or issue any Letters of Credit shall forthwith terminate
immediately; and/or (ii) terminate any Letter of Credit which may be terminated
in accordance with its terms and/or (iii) upon five (5) Business Days’ written
notice to the Borrower (with a copy to counsel for the Committee and to the
Office of the United States Trustee for the Southern District of New York),
charge, set-off and otherwise apply all or any part of the Collateral against
unpaid Obligations then due or which subsequently become due.



     Section 9. MISCELLANEOUS.



     9.01. Right of Setoff. In addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any such
rights, upon the occurrence of an Event of Default, the Bank is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Borrower or to any other Person
(other than upon five (5) Business Days’ written notice to the Borrower (with a
copy to counsel for the Committee and to the Office of the United States
Trustee for the Southern District of New York)), any such notice being hereby
expressly waived, and without further order of or application to the Bankruptcy
Court, to set off and to appropriate and apply any and all deposits (general or
special) and any other indebtedness at any time held or owing by the Bank,
including all deposits held in the Collateral Account, in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by the Bank, or any branch or agency thereof to or for the credit
or the account of the Borrower against and on account of the Obligations and
liabilities of the Borrower to the Bank under this Agreement or under any of
the other Credit Documents, and all other claims of any nature or description
arising out of or connected with this Agreement or any other Credit Document,
irrespective of whether the Bank shall have made any demand hereunder and
although such Obligations, liabilities or claims, or any of them, shall be
contingent or unmatured.



     9.02. Notices. Except as otherwise expressly provided herein, all notices
and other communications provided for hereunder shall be in writing (including
telegraphic, telex, telecopier or cable communication) or by telephone (but if
by telephone, confirmed immediately by telex, telecopier or cable
communication) and mailed, telegraphed, telexed, telecopied, cabled or
delivered: if to the Borrower, at its address specified opposite its signature
below; if to the Bank, at the Notice Office; or, as to the Borrower, at such
other address as shall be designated by such party in a written notice to the
other parties hereto and, as to each other party, at such other address as
shall be designated by such party in a written notice to the Borrower. No such
notice or communication shall be effective until received.



     9.03. Expenses; Indemnity. (a) The Borrower shall pay (i) all reasonable
out-of-pocket expenses incurred by the Bank and its Affiliates, including the
reasonable fees,



 









 





charges and disbursements of counsel for the Bank, in connection with the
preparation, negotiation and administration of the Credit Documents or any
amendments, modifications or waivers of the provisions thereof (whether or not
the transactions contemplated hereby or thereby shall be consummated), (ii) all
reasonable out-of-pocket expenses paid to third parties by the Bank in
connection with the issuance, amendment, renewal or extension of any Letter of
Credit or any demand for payment thereunder and (iii) all out-of-pocket
expenses incurred by the Bank, including the reasonable fees, charges and
disbursements of any counsel for the Bank in connection with the enforcement or
protection of its rights in connection with this Agreement, including its
rights under this Section, or in connection with any Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Letters of Credit.



     (b) The Borrower shall indemnify the Bank and each Affiliate of the Bank
(each such Person being called an “Indemnitee”) against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any expert
witness or counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement or any agreement or instrument
contemplated hereby, the performance by the parties hereto of their respective
obligations hereunder or the consummation of the transactions contemplated
hereby; (ii) any Letter of Credit or the use of the proceeds therefrom
(including any refusal by the Bank to honor a demand for payment under a Letter
of Credit if the documents presented in connection with such demand do not
strictly comply with the terms of such Letter of Credit); (iii) any transfer,
sale, delivery, surrender, or endorsement of any Drawing Document at any
time(s) held by any Indemnitee in connection with any Letter of Credit; (iv)
any independent undertakings issued by the beneficiary of any Letter of Credit;
(v) any unauthorized, fraudulent or improper Instructions or error in computer
transmission; (vi) the acts or omissions, whether rightful or wrongful, of any
present or future de jure or de facto governmental or regulatory authority or
cause or event beyond the control of such Indemnitee; (vii) any actual or
alleged presence or release of hazardous materials on or from any property
owned or operated by the Borrower or any of its Subsidiaries, or any
environmental liability related in any way to the Borrower or any of its
Subsidiaries; or (viii) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is
a party thereto; provided that such indemnity shall not, as to any Indemnitee,
be available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or
willful misconduct of such Indemnitee.



     (c) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby, the
transactions contemplated hereby, or Letter of Credit or the use of the
proceeds thereof.



 









 





     (d) All amounts due under this Section shall be payable not later than 15
days after written demand therefor.



     9.04. Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided that the Borrower may not assign or
transfer any of its rights or obligations hereunder or under any other Credit
Document without the prior written consent of the Bank. The Bank may at any
time grant participations in any or all of its rights and/or obligations
hereunder to another financial institution; provided that in the case of any
such participation, the participant shall not have any rights under this
Agreement or any of the other Credit Documents (the participant’s rights
against such Bank in respect of such participation to be those set forth in the
agreement executed by such Bank in favor of the participant relating thereto)
and all amounts payable by the Borrower hereunder shall be determined as if
such Bank had not sold such participation, except that the participant shall be
entitled to receive the additional amounts under Section 2.12 to, and only to,
the extent that such Bank would be entitled to such benefits if the
participation had not been entered into or sold; and provided further, that the
Bank shall not transfer, grant or assign any participation under which the
participant shall have rights to approve any amendment to or waiver of this
Agreement or any other Credit Document except to the extent such amendment or
waiver would (i) reduce the principal amount thereof, or increase such
participant’s participating interest in any Commitment over the amount thereof
then in effect (it being understood that a waiver of any Default or Event of
Default or of a mandatory reduction in the Commitment shall not constitute a
change in the terms of any Commitment and that an increase in any Commitment
shall be permitted without the consent of any participant if such participant’s
participation is not increased as a result thereof) or (ii) permit the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement except in accordance with the terms hereof and thereof.



     9.05. No Waiver; Remedies Cumulative. No failure or delay on the part of
the Bank in exercising any right, power or privilege hereunder or under any
other Credit Document and no course of dealing between the Borrower or the Bank
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or under any other Credit Document
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder or thereunder. The rights, powers and
remedies herein or in any other Credit Document expressly provided are
cumulative and not exclusive of any rights, powers or remedies which the Bank
would otherwise have. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Bank to any
other or further action in any circumstances without notice or demand.



     9.06. Calculations; Computations. All computations of interest in respect
of Fees and interest hereunder shall be made on the basis of a year of 360 days
for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest or Fees are payable.



     9.07. Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury
Trial. (a) This Agreement and the other Credit Documents and the rights and
obligations of the parties



 









 





hereunder and thereunder shall be construed in accordance with and be
governed by the law of the State of New York. Any legal action or proceeding
between the Borrower and any other party to this Agreement or any other Credit
Document arising out of or with respect to this Agreement or any other Credit
Document must be brought (a) prior to the Plan Effective Date, in the
Bankruptcy Court and (b) at any time thereafter, in the state courts of the
State of New York located in the County of New York or in the courts of the
United States for the Southern District of New York, and the Borrower submits
to the non-exclusive jurisdiction of such courts for the purpose of any such
suit, action or proceeding or judgment. Each party to this Agreement
irrevocably consents to service of process in the manner provided for notices
in Section 9.02, such service to become effective 30 days after such mailing.
Nothing in this Agreement will affect the right of any party to this Agreement
to serve process in any other manner permitted by law. Nothing herein shall
affect the right of the Bank to bring any legal action or proceeding against
the Borrower in any court having jurisdiction with respect thereto but actions
and proceedings brought prior to the Plan Effective Date shall be brought in
the Bankruptcy Court.



     (b) Each of the Bank and the Borrower hereby irrevocably waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Credit Document brought in the courts referred to in Section 9.07(a) and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought
in an inconvenient forum.



     (c) Each of the Borrower and the Bank waives, to the fullest extent it may
legally and effectively do so, any right it may have to jury trial in any legal
proceeding directly or indirectly arising out of or relating to each of the
Borrower’s and the Bank’s rights and obligations under this Agreement or
transactions contemplated hereby (whether based on contract, tort or any other
theory).



     9.08. Confidentiality. The Bank shall hold, and shall cause its
participants and prospective participants, if any, to agree to hold, all
non-public information obtained pursuant to the requirements of any Credit
Document which has been identified as such by the Borrower in accordance with
its customary procedure for handling confidential information of such nature
and in accordance with safe and sound banking practices and in any event may
make disclosure reasonably required by any bona fide assignee, transferee or
participant or as legally required or reasonably requested by any governmental
agency or representative thereof or pursuant to legal process.



     9.09. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Bank.



 









 





     9.10. Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any provision of this
Agreement.



     9.11. Amendment or Waiver. Neither this Agreement nor any other Credit
Document nor any terms hereof or thereof may be amended, waived, discharged or
terminated unless such amendment, waiver, discharge or termination is in
writing signed by the Bank and, in the case of any amendment, by the Borrower.



     9.12. Survival. All indemnities set forth herein including, without
limitation, in Sections 2.06 and 9.03 shall survive the execution and delivery
of this Agreement.



 









 





     IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above
written.



	 	 	 	 	 	 	 
	 	 	 	 	SPACE SYSTEMS/LORAL, INC.
	 
	 	 	 	 	 	 
	

	 	 	 	By	 	 
	

	 	 	 	 	 	
 
	

	 	 	 	 	 	Name:
	

	 	 	 	 	 	Title:
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	Address:
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	Attention:
	

	 	 	 	 	 	Fax number:
	

	 	 	 	 	 	Telephone:
	 
	 	 	 	 	 	 
	JPMORGAN CHASE BANK	 	 	 	 
	 
	 	 	 	 	 	 
	By
	 	 	 	 	 	 
	

	 	
 	 	 	 	 
	Name: Anna Marie Greer
	Title: Vice President