Document:

<PAGE>
                                                                   Exhibit 10.3

                               FIRST AMENDMENT TO
                                CREDIT AGREEMENT

      THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered
into as of December 21, 2001 among Loral Satellite, Inc., a Delaware corporation
(the "Borrower"), the Lenders and Bank of America, N.A., as administrative agent
(in such capacity, the "Administrative Agent"). Capitalized terms used herein
and not otherwise defined herein shall have the respective meanings given to
such terms in the Agreement (as defined below).

                                    RECITALS

      WHEREAS, the Borrower, the Administrative Agent and the Lenders are
parties to that certain Credit Agreement dated as of November 17, 2000 (as
amended or modified from time to time, the "Agreement");

      WHEREAS, the Borrower has requested that the Lenders amend the
Agreement as provided herein;

      NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

      1. Reaffirmation of Existing Debt. The Borrower and the Guarantors
acknowledge and confirm (a) that the Borrower's obligation to repay the
outstanding principal amount of the Loans is unconditional and not subject to
any present offsets, defenses or counterclaims, (b) that the Administrative
Agent and the Lenders have performed fully all of their respective obligations
under the Agreement and the other Loan Documents, and (c) by entering into this
Amendment, the Lenders do not waive or release any term or condition of the
Agreement or any of the other Loan Documents or any of their rights or remedies
under such Loan Documents or applicable law or any of the obligations of the
Borrower or any Guarantor thereunder.

      2.    Amended Definitions.

            (a) The definition of "Appraised Value" set forth in Section 1.1 of
      the Agreement is hereby amended to include at the end thereof the
      following:

                  "In connection with any release of Collateral and
            determinations of Appraised Value in connection therewith, the
            subject appraisals shall be not more than three (3) months old as of
            the date of any such release."

            (b) The definition of "Collateral Coverage Ratio" set forth in
      Section 1.1 of the Agreement is hereby amended and restated in its
      entirety to read as follows:

                  "Collateral Coverage Ratio": at any time, the ratio of (a)
            Collateral Pool Value at such time to (b) the difference between (i)
            the sum of (x) the aggregate
<PAGE>
            principal amount of the Term Loans then outstanding plus (y) the
            amount of the Revolving Commitments at such time and (ii) the amount
            of Cash Collateral on the aggregate sum of balances (consisting of
            cash and Cash Equivalents) on deposit in the Loral Satellite
            Collateral Account.

            (c) The definition of "Loan Documents" set forth in Section 1.1 of
      the Agreement is hereby amended and restated in its entirety to read as
      follows:

                  "Loan Documents": this Agreement, the Assignment Agreement,
            any Notes, the Guarantees, the LSCC Pledge Agreement, the
            Collateral Agreement, the Collateral Agency Agreement, the
            Intercompany Notes, the Cash Collateral Agreement, the SpaceCom
            Collateral Documents and the Intercreditor Agreement.

            (d) The definition of "Revolving Loans" set forth in Section 1.1 of
      the Agreement is hereby amended and restated in its entirety to read as
      follows:

                  "Revolving Loans":  as defined in subsection 2.4.

            (e) The definition of "Revolving Termination Date" set forth in
      Section 1.1 of the Agreement is hereby amended and restated in its
      entirety to read as follows:

                  "Revolving Termination Date": January 7, 2005, or such earlier
            date on which the Revolving Commitments may terminate in accordance
            with the terms of this Agreement.

      3. New Definitions. The following definitions for "Collateral Coverage
Release Ratio", "Consolidated Funded Debt", "Consolidated Leverage Ratio",
"Intercreditor Agreement", "Release of SpaceCom Collateral Event", "SpaceCom
Collateral", "SpaceCom Collateral Documents" and "SpaceCom Parties" are hereby
added to Section 1.1 of the Agreement in the appropriate alphabetical order and
shall read as follows:

            "Collateral Coverage Release Ratio": at any time, the ratio of (a)
      the Collateral Pool Value at such time plus the value of other collateral
      pledged to secure the Loans acceptable to the Administrative Agent and the
      Required Lenders in their reasonable discretion to (b) the difference
      between (i) the sum of (x) the aggregate principal amount of the Term
      Loans then outstanding plus (y) the amount of the Revolving Commitments at
      such time and (ii) the amount of Cash Collateral on the aggregate sum of
      balances (consisting of cash and Collateral Cash Equivalents) on deposit
      in the Loral Satellite Collateral Account.

            "Consolidated Debt": the sum of (a) the Funded Debt of the
      Borrower and its Subsidiaries determined in accordance with GAAP on a
      consolidated basis plus (b) the amount of the Revolving Commitments
      minus the amount of Revolving Loans outstanding.

                                       2
<PAGE>
            "Consolidated Leverage Ratio": the ratio of (a) the Consolidated
      Debt of the Borrower and its Subsidiaries as of the date of calculation to
      (b) Consolidated EBITDA for the Borrower and its Subsidiaries on a
      consolidated basis for the most recently ending four quarter period for
      which financial statements have been made available to the Lenders.

            "Intercreditor Agreement": the Intercreditor and Subordination
      Agreement to be dated as of December 21, 2001, as amended and modified,
      among the Administrative Agent, the administrative agent under the Senior
      Credit Agreement (as defined therein), Bank of America, N.A., as
      Collateral Agent, Loral SpaceCom Corporation and the Subsidiaries of Loral
      SpaceCom Corporation parties thereto, a copy of which is attached as
      Exhibit Q.

            "Release of SpaceCom Collateral Event": the Borrower shall have
      attained a Consolidated Leverage Ratio of less than or equal to 4.0 to 1.0
      and a Collateral Coverage Release Ratio of greater than or equal to 2.5 to
      1.0.

            "SpaceCom Collateral": a collective reference to the collateral
      which is identified in, and at any time will be covered by the SpaceCom
      Collateral Documents.

            "SpaceCom Collateral Documents": the security agreements, mortgages,
      deeds of trust, pledge agreements and all other security documents
      executed and delivered by the SpaceCom Parties granting a Lien on any
      asset or assets of the SpaceCom Parties to directly or indirectly secure
      the Obligations.

            "SpaceCom Parties": Loral SpaceCom Corporation and each Domestic
      Subsidiary of Loral SpaceCom Corporation.

      4.    Application of GAAP.  Subsection 1.2(b) is hereby amended and
restated to read as follows:

            (b) Except as otherwise expressly provided herein, all accounting
      terms used herein shall be interpreted, and all financial statements and
      certificates and reports as to financial matters required to be delivered
      hereunder shall be prepared, in accordance with GAAP applied on a
      consistent basis. All calculations made for the purposes of determining
      compliance with this Credit Agreement shall (except as otherwise expressly
      provided herein) be made by application of GAAP applied on a basis
      consistent with the most recent annual or quarterly financial statements
      delivered pursuant to Section 5.1 (or, prior to the delivery of the first
      financial statements pursuant to Section 5.1, consistent with the annual
      audited financial statements referenced in Section 3.1(i)); provided,
      however, if (a) the Borrower shall object to determining such compliance
      on such basis at the time of delivery of such financial statements due to
      any change in GAAP or the rules promulgated with respect thereto or (b)
      the Administrative Agent or the Required Lenders shall so object in
      writing within sixty days after delivery of such financial statements,
      then such calculations shall be made on a basis consistent with the most
      recent financial statements delivered by the Borrower to the Lenders as to
      which no such objection shall have been made.

                                       3
<PAGE>
      5.    Repayment of Term Loans.  Section 2.3 of the Agreement is hereby
amended and restated in its entirety to read as follows:

            2.3 Repayment of Term Loans. The Term Loan of each Lender shall be
      repaid in installments on the dates set forth below (or such earlier date
      or dates on which the Term Loans become due and payable pursuant to
      Section 2.9 or Section 7), each of which shall be in amount equal to such
      Lender's Term Percentage multiplied by the amount set forth below opposite
      such installment date:

<TABLE>
<CAPTION>
                  Installment Date              Dollar Amount

<S>                                             <C>
                  March 31, 2002                $11,250,000
                  June 30, 2002                 $11,250,000
                  September 30, 2002            $11,250,000
                  December 31, 2002             $11,250,000
                  March 31, 2003                $11,250,000
                  June 30, 2003                 $11,250,000
                  September 30, 2003            $11,250,000
                  December 31, 2003             $11,250,000
                  March 31, 2004                $11,250,000
                  June 30, 2004                 $11,250,000
                  September 30, 2004            $11,250,000
                  January 7, 2005               $170,250,000
</TABLE>

      6.    Mandatory Prepayments.  Subsection 2.9(d) of the Agreement is
hereby amended and restated in its entirety to read as follows:

            (d) The Term Loans shall be prepaid, and the Commitments shall be
      automatically reduced, by an amount equal to 100% of the Net Cash Proceeds
      received as a result of any sale of a transponder on any Satellite or any
      Satellite removed from the Collateral Pool pursuant to Section 2(b)(ii),
      Section 2(b)(iii) or Section 2(b)(iv) of the Collateral Agreement and sold
      pursuant to subsection 6.5(i)(B), subsection 6.5 (vii) or subsection
      6.5(viii), respectively.

      7.    Cash Collateral Accounts.  Clause (ii) of Subsection 5.10(a) of
the Agreement is hereby amended and restated in its entirety to read as
follows:

            (ii) at any time after an Event of Default occurs and is continuing,
      deposit all lease payments received by the Borrower in connection with the
      Master Lease Agreements, the Availability Agreements and any other
      agreements with respect to any Orbiting Satellite directly into the Loral
      Satellite Collateral Account, and

      8.    Limitation on Sale of Assets. Subsection 6.5(i) of the Agreement
is hereby amended and restated in its entirety to read as follows:

                                       4
<PAGE>
            (i)(A) so long as no Default or Event of Default shall have occurred
      and be continuing or would result therefrom, the Borrower may sell, lease,
      transfer or otherwise dispose of assets released from the Collateral Pool
      pursuant to Section 2(b)(i) of the Collateral Agreement and (B) the
      Borrower may sell, lease, transfer or otherwise dispose of assets released
      from the Collateral Pool pursuant to Section 2(b)(ii) of the Collateral
      Agreement, provided that the Net Cash Proceeds of such sales, lease,
      transfers or other disposition are applied to prepay Term Loans and reduce
      Commitments pursuant to subsection 2.9(d);

      9.    Limitation on Restricted Payments.  Subsection 6.6(ii) of the
Agreement is hereby amended and restated in its entirety to read as follows:

            (ii) the Borrower may make a distribution in the form of a dividend
      to Loral of assets released from the Collateral Pool pursuant to Section
      2(b)(i) of the Collateral Agreement;

      10.   Satellite Locations.  A new Section 6.18 is hereby added to the
Agreement and shall read as follows:

            6.18 Satellite Locations. Permit (i) Telstar 6 (other than as a
      result of casualty) or its replacement, Telstar R, to move from its
      orbital slot located at 93 degrees west longitude or (ii) Telstar 7 (other
      than as a result of casualty) or its replacement, Telstar R, to move from
      its orbital slot located at 129 west longitude.

      11.   Intercreditor Agreement.  A new Section 8.11 is hereby added to
the Agreement and shall read as follows:

            8.11 Intercreditor Agreement. By execution of this Agreement, each
      Lender acknowledges, and agrees to be bound by, the terms of the
      Intercreditor Agreement, and further authorizes and directs the
      Administrative Agent and the Collateral Agent to enter into the
      Intercreditor Agreement on its behalf. The Lenders hereunder expressly
      acknowledge and agree that if the Intercreditor Agreement is terminated or
      the terms of Section 2.3 of the Intercreditor Agreement provide for
      application of proceeds of the SpaceCom Collateral to the outstanding
      Loans (a) the SpaceCom Parties shall thereafter continue to have the right
      to sell SpaceCom Collateral in the ordinary course of business (within the
      meaning provided in Section 9-320(a) of the Uniform Commercial Code in
      effect in the State of New York on the date of the First Amendment to
      Credit Agreement), free and clear of the lien of the Lenders and (b) any
      such application of proceeds of SpaceCom Collateral to the Loans shall
      only be required until, and to the extent necessary to achieve, a release
      of the liens on SpaceCom Collateral in accordance with the terms of
      Section 9.15 hereof, provided that the Borrower may take up to 30 days to
      make application of the net cash proceeds, so long as the net cash
      proceeds necessary to achieve such release are delivered to the Collateral
      Agent as cash collateral pending such application. If, in connection with
      any delivery of net cash proceeds as cash collateral pending application
      to the Loans hereunder, (i) during the interim period

                                       5
<PAGE>
      between the date of delivery of the net cash proceeds as cash collateral
      and the date of application thereof either of the conditions to release of
      collateral identified in the parenthetical in Section 9.15 fail to be
      true, the Borrower will make immediate application to the Loans the entire
      amount of net cash proceeds received in connection with the assets which
      were the subject of the release, including the portion of net cash
      proceeds held as cash collateral pending application, and (ii) at the end
      of the 30-day period the Borrower shall have failed to obtain a release of
      the SpaceCom Collateral in accordance with the requirements of Section
      9.15, the net cash proceeds held as cash collateral will be applied to the
      Loans hereunder. Further, the Lenders hereunder acknowledge that if the
      indebtedness outstanding under the Senior Credit Documents (as defined in
      the Intercreditor Agreement ) is paid in full and the Senior Credit
      Documents are terminated, SpaceCom shall thereafter have the right to
      incur up to $125 million of new First Tier Indebtedness and the Lenders
      agree that they will acknowledge and reaffirm any such additional
      indebtedness as constituting "First Tier Indebtedness" under a new
      intercreditor agreement substantially identical to the Intercreditor
      Agreement.

      12.   Release of SpaceCom Collateral.  A new Section 9.15 is hereby
added to the Agreement and shall read as follows:

            9.15 Release of SpaceCom Collateral. Upon the occurrence of a
      Release of SpaceCom Collateral Event, the Lenders agree (provided that no
      Default or Event of Default has occurred and is continuing and there shall
      exist at least two Orbiting Satellites) to take such action as is
      reasonably necessary (at the expense of the Borrower) to release their
      liens and security interests in the SpaceCom Collateral. The Lenders
      hereby authorize the Administrative Agent and the Collateral Agent to
      execute and deliver such documentation or to take such action (at the
      expense of the Borrower) as is reasonably necessary to release its liens
      and security interests in the SpaceCom Collateral.

      13. Exhibit Q. A new Exhibit Q named "Form of Intercreditor Agreement" is
hereby added to the Agreement and shall read as provided on Exhibit Q attached
hereto.

      14.   Conditions Precedent.  The effectiveness of this Amendment is
subject to the satisfaction of each of the following conditions (in form and
substance acceptable to the Administrative Agent):

            (a) The Agent shall have received counterparts of this Amendment
      duly executed by the Borrower, the Guarantors, the Administrative Agent
      and the Lenders;

            (b) The Administrative Agent shall have received a copy of the
      resolutions, in form and substance reasonably satisfactory to the
      Administrative Agent, of the Board of Directors of the Borrower and each
      Guarantor authorizing the execution, delivery and performance of this
      Amendment, certified by the Secretary or an Assistant Secretary of the
      Borrower and each such Guarantor as of the date hereof, which certificate
      shall state that the resolutions thereby certified have not been amended,
      modified, revoked or

                                       6
<PAGE>
      rescinded and shall be in form and substance reasonably satisfactory to
      the Administrative Agent.

            (c) The Administrative Agent shall have received a copy of the
      resolutions, in form and substance satisfactory to the Administrative
      Agent, of the Board of Directors of each SpaceCom Party which is a party
      to a SpaceCom Collateral Document authorizing (i) the execution, delivery
      and performance of the SpaceCom Collateral Documents to which it is a
      party and (ii) the granting by it of the Liens created pursuant to the
      SpaceCom Collateral Documents to which it is a party, certified by the
      Secretary or an Assistant Secretary of each such SpaceCom Party as of the
      date hereof, which certificate shall be in form and substance satisfactory
      to the Administrative Agent and shall state that the resolutions thereby
      certified have not been amended, modified, revoked or rescinded.

            (d) The Administrative Agent shall have received a certificate of
      each SpaceCom Party dated as of the date hereof, as to the incumbency and
      signature of the officers of such SpaceCom Parties executing any SpaceCom
      Collateral Document, satisfactory in form and substance to the
      Administrative Agent, executed by the President or any Vice President and
      the Secretary or any Assistant Secretary of each such SpaceCom Party.

            (e) The Administrative Agent shall have received true and complete
      copies of the certificate of incorporation and by-laws of each SpaceCom
      Party, certified as of the date hereof as complete and correct copies
      thereof by the Secretary or an Assistant Secretary of such SpaceCom Party.

            (f) The Administrative Agent shall have received the results of a
      recent lien search in each relevant jurisdiction with respect to the
      SpaceCom Parties, which shall reveal no liens on any assets of the
      SpaceCom Parties except for liens permitted under the SpaceCom Credit
      Agreement or liens to be discharged on or prior to the date hereof
      pursuant to documentation satisfactory to the Administrative Agent.

            (g) The Administrative Agent shall have received the executed legal
      opinion of Willkie Farr & Gallagher, counsel to the Borrower and the
      Guarantors satisfactory in form and substance to the Administrative Agent.
      Such legal opinion shall cover such other matters incident to the
      transactions contemplated by this Amendment as the Administrative Agent
      may reasonably require.

            (h)   Receipt by the Administrative Agent or its agent of the
      following:

                  (i) Duly executed UCC financing statements, or their
            equivalent, for each jurisdiction as necessary or appropriate, in
            the Administrative Agent's discretion, to perfect the security
            interest in the SpaceCom Collateral.

                                       7
<PAGE>
                  (ii) Original certificates evidencing capital stock,
            membership interest or similar equity interest which is the subject
            of the SpaceCom Collateral Documents, together with undated stock
            transfer powers executed in blank.

                  (iii) Such patent, trademark and copyright notices and filings
            as necessary or appropriate, in the Administrative Agent's
            discretion, to perfect the security interests in intellectual
            property that constitutes a part of the SpaceCom Collateral.

                  (iv) Landlord consents, estoppel letters or consents and
            waivers in respect of SpaceCom Collateral held on leased premises as
            reasonably required by the Administrative Agent.

            (i)   Receipt by the Administrative Agent of the following:

                  (i) Copies of recent ALTA surveys of each of the mortgaged
            properties of the SpaceCom Parties (other than those identified in
            Section 15(a) hereof) by registered engineers or land surveyors, in
            form and detail (including the location of special flood hazard
            areas) acceptable to the Administrative Agent.

                  (ii) Standard ALTA mortgagee policies insuring the priority of
            the mortgages in amounts and from companies acceptable to the
            Administrative Agent. The title policies shall include only such
            exceptions as are acceptable to the Administrative Agent. Copies of
            recorded documentation relating to all such exceptions shall be
            provided to the Administrative Agent prior to the date hereof.

                  (iii) Executed legal opinions from local counsel regarding the
            enforceability of the mortgages under local law in form and
            substance acceptable to the Administrative Agent.

                  (iv) Copies of environmental reports and other environmental
            documentation, if any, relating to the mortgaged property and other
            real property leased by a SpaceCom Party, which reports and
            documentation shall be in form and detail satisfactory to the
            Administrative Agent.

            (j)   Receipt by the Administrative Agent of a fully executed
      copy of the Intercreditor Agreement.

            (k) Receipt by the Administrative Agent of an executed amendment and
      restatement of the Loral SpaceCom Corporation credit facility confirming,
      among other things, that the aggregate facilities provided thereunder is
      not in excess of $600 million and has a maturity not sooner than January
      7, 2005.

            (l) Payment by the Borrower to the Lenders and the Administrative
      Agent of all fees due and owing in connection with this Amendment,
      including without limitation, an amendment fee to each Lender in an amount
      equal to 0.75% of its Commitment.

                                       8
<PAGE>
      15.   Conditions Subsequent.  The Borrower covenants and agrees to
provide, or cause to be provided, to the Administrative Agent each of the
following items on or before the dates identified:

            (a) Survey. Within ninety (90) days of the date hereof, an ALTA
      survey of the Petaluma, California mortgaged property of the SpaceCom
      Parties by registered engineers or land surveyors, in form and detail
      (including the location of special flood hazard areas) acceptable to the
      Administrative Agent.

            (b) Landlord's Estoppel. The Borrower will use reasonable commercial
      efforts absent the payment of any fees or the making of any concessions to
      obtain a landlord's estoppel in respect of the SpaceCom Parties' property
      in Richmond, California.

      16.   Miscellaneous.

            (a) The term "Agreement" as used in each of the Loan Documents shall
      hereafter mean the Agreement as amended by this Amendment. Except as
      herein specifically agreed, the Agreement, and the obligations of the
      Borrower and the Guarantors thereunder and under the other Loan Documents,
      are hereby ratified and confirmed and shall remain in full force and
      effect according to their terms.

            (b) The Borrower and the Guarantors, as applicable, affirm the liens
      and security interests created and granted in the Agreement and the Loan
      Documents and agree that this Amendment shall in no manner adversely
      affect or impair such liens and security interests.

            (c)   The Borrower and the Guarantors hereby represent and
      warrant as follows:

                  (i) The Borrower and each of the Guarantors has taken all
            necessary action to authorize the execution, delivery and
            performance of this Amendment.

                  (ii) This Amendment has been duly executed and delivered by
            the Borrower and the Guarantors and constitutes the Borrower's and
            each of the Guarantors' legal, valid and binding obligations,
            enforceable in accordance with its terms, except as such
            enforceability may be subject to (i) bankruptcy, insolvency,
            reorganization, fraudulent conveyance or transfer, moratorium or
            similar laws affecting creditors' rights generally and (ii) general
            principles of equity (regardless of whether such enforceability is
            considered in a proceeding at law or in equity).

                  (iii) No consent, approval, authorization or order of, or
            filing, registration or qualification with, any court or
            governmental authority or third party is required in connection with
            the execution, delivery or performance by the Borrower or any
            Guarantor of this Amendment.

                                       9
<PAGE>
            (d) The Borrower and the Guarantors represent and warrant to the
      Lenders that (i) the representations and warranties of the Borrower set
      forth in Section 3 of the Agreement are true and correct as of the date
      hereof, (ii) no unwaived event has occurred and is continuing which
      constitutes a Default or an Event of Default and (iii) neither the
      Borrower nor any Guarantor has any counterclaims, offsets, credits or
      defenses to the Loan Documents and the performance of its obligations
      thereunder, or if the Borrower or any Guarantor has any such claims,
      counterclaims, offsets, credits or defenses to the Loan Documents or any
      transaction related to the Loan Documents, same are hereby waived,
      relinquished and released in consideration of the Lenders' execution and
      delivery of this Amendment.

            (e) The Guarantors (i) acknowledge and consent to all of the terms
      and conditions of this Amendment, (ii) affirm all of their obligations
      under the Loan Documents (including without limitation its respective
      Guarantee) and (iii) agree that this Amendment and all documents executed
      in connection herewith do not operate to reduce or discharge the
      Guarantors' obligations under the Guarantees or the other Loan Documents.

            (f) This Amendment may be executed in any number of counterparts,
      each of which when so executed and delivered shall be an original, but all
      of which shall constitute one and the same instrument. Delivery of an
      executed counterpart of this Amendment by telecopy shall be effective as
      an original and shall constitute a representation that an executed
      original shall be delivered.

            (g) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
      HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
      WITH THE LAWS OF THE STATE OF NEW YORK.

                 [Remainder of Page Intentionally Left Blank]

                                       10
<PAGE>
      Each of the parties hereto has caused a counterpart of this Amendment to
be duly executed and delivered as of the date first above written.

BORROWER:                     LORAL SATELLITE, INC., a Delaware
                              corporation

                              By:   /s/  Richard Mastoloni
                                    --------------------------------------
                              Name:  Richard Mastoloni
                                    --------------------------------------
                              Title: Vice President
                                    --------------------------------------

                           [Signature Pages Continue]

                                                         LORAL SATELLITE, INC.
                                                               FIRST AMENDMENT
<PAGE>
LENDERS:                      BANK OF AMERICA, N.A., in its capacity
                              as Administrative Agent

                              By:   /s/  Steve A. Aronowitz
                                    --------------------------------------
                              Name:  Steve A. Aronowitz
                                    --------------------------------------
                              Title: Managing Director
                                    --------------------------------------

                              BANK OF AMERICA, N.A., as a Lender

                              By:   /s/  Steve A. Aronowitz
                                    --------------------------------------
                              Name:  Steve A. Aronowitz
                                    --------------------------------------
                              Title: Managing Director
                                    --------------------------------------

                              NATIONAL WESTMINSTER BANK PLC,
                              a Lender

                              By:  NatWest Capital Markets Limited, its agent
                              By:  Greenwich Capital Markets, Inc., its agent

                              By:   /s/  Harry Paschalidis
                                    --------------------------------------
                              Name:  Harry Paschalidis
                                    --------------------------------------
                              Title: AVP
                                    --------------------------------------

                              CREDIT LYONNAIS NEW YORK BRANCH,
                              as a Lender

                              By:   /s/  Patrick McCarthy
                                    --------------------------------------
                              Name:  Patrick McCarthy
                                    --------------------------------------
                              Title: Vice President
                                    --------------------------------------

                              PACIFICA PARTNERS I, L.P., as a Lender

                              By:   Imperial Credit Asset Management
                                    as its Investment Manager

                              By:   /s/  Dean K. Kawai
                                    --------------------------------------
                              Name:  Dean K. Kawai
                                    --------------------------------------
                              Title: Vice President
                                    --------------------------------------

                                                         LORAL SATELLITE, INC.
                                                               FIRST AMENDMENT
<PAGE>
                              AMMC CDO I, LIMITED, as a Lender

                              By:   American Money Management Corp.
                                    as Collateral Manager

                              By:   /s/  David P. Meyer
                                    --------------------------------------
                              Name:  David P. Meyer
                                    --------------------------------------
                              Title: Vice President
                                    --------------------------------------

                              SOCIETE GENERALE, as a Lender

                              By:   /s/ P. Menard
                                    --------------------------------------
                              Name:  P. Menard
                                    --------------------------------------
                              Title: Head of Media and Telecom Sector
                                    --------------------------------------

                              SYNDICATED LOAN FUNDING TRUST, as
                              a Lender

                              By:   Lehman Commercial Paper, Inc.,
                                          Not in its individual capacity
                                          but solely as Asset Manager

                              By:   /s/  G. Andrew Keith
                                    --------------------------------------
                              Name:  G. Andrew Keith
                                    --------------------------------------
                              Title: Authorized Signatory
                                    --------------------------------------

                              TRANSAMERICA EQUIPMENT FINANCIAL
                              SERVICES CORPORATION, as a Lender

                              By:   /s/ Ron Linn
                                    --------------------------------------
                              Name:  Ron Linn
                                    --------------------------------------
                              Title: Vice President
                                    --------------------------------------

                              CHANG HWA COMMERCIAL BANK, LTD.,
                              NEW YORK BRANCH, as a Lender

                              By:   /s/  Ming-Hsien Lin
                                    --------------------------------------
                              Name:  Ming-Hsien Lin
                                    --------------------------------------
                              Title: VP & General Manager
                                    --------------------------------------

                                                         LORAL SATELLITE, INC.
                                                               FIRST AMENDMENT
<PAGE>
Acknowledged and Agreed:

LORAL SPACE AND COMMUNICATIONS LTD.,
as Guarantor

By:    /s/  Richard Mastoloni
     ------------------------------
Name:  Richard Mastoloni
     ------------------------------
Title: Vice President
     ------------------------------

                                                         LORAL SATELLITE, INC.
                                                               FIRST AMENDMENT<PAGE>
                                                                   Exhibit 10.4

                               SECURITY AGREEMENT

         THIS SECURITY AGREEMENT (this "Security Agreement"), dated as of
December 21, 2001, is by and among the parties identified as "GRANTORS" on the
signature pages hereto and such other parties as may become Grantors hereunder
after the date hereof (individually a "Grantor", and collectively the
"Grantors") and BANK OF AMERICA, N.A., as collateral agent (in such capacity,
the "Collateral Agent") for the holders of the Secured Obligations referenced
below.

                               W I T N E S S E T H

         WHEREAS, a $600 million credit facility has been established in favor
of Loral SpaceCom Corporation, a Delaware corporation (the "Company"), pursuant
to the terms of that Amended and Restated Credit Agreement dated as of the date
hereof (as amended, modified, increased, extended, renewed or replaced, the
"SpaceCom Credit Agreement") among the Company, as borrower, the lenders
identified therein and Bank of America, N.A., as Administrative Agent;

         WHEREAS, a $494 million credit facility has been established in favor
of Loral Satellite, Inc., a Delaware corporation ("Satellite") pursuant to the
terms of that Credit Agreement dated as of November 17, 2000 (as amended,
modified, extended, increased, renewed or replaced, the "Satellite Credit
Agreement") among Satellite, as borrower, the lenders identified therein and
Bank of America, N.A., as Administrative Agent; and

         WHEREAS, the Company has agreed to provide, and to cause its Domestic
Subsidiaries to provide, a pledge of and security interest in substantially all
of the personal property of the Company and its Domestic Subsidiaries, subject
only to certain exceptions and qualifications identified herein and in the
Collateral Documents, to secure the loans and obligations owing under both the
SpaceCom Credit Agreement and the Satellite Credit Agreement as hereafter more
particularly described;

         NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

         1. Definitions. Capitalized terms used and not otherwise defined herein
shall have the meanings provided in the Credit Agreement. In addition, the
following terms, which are defined in the UCC as in effect in the State of New
York on the date hereof, are used herein as so defined: Accession, Account,
As-Extracted Collateral, Chattel Paper, Commercial Tort Claim, Commingled Goods,
Consumer Goods, Deposit Account, Document, Equipment, Farm Products, Fixtures,
General Intangible, Goods, Instrument, Inventory, Investment Property,
Letter-of-Credit Right, Manufactured Home, Proceeds, Software, Standing Timber,
Supporting Obligation and Tangible Chattel Paper. As used herein:

                  "Collateral" has the meaning provided in Section 2 hereof.

                  "Collateral Documents" means any and all security agreements,
         pledge agreements, deeds of trust, security deeds, mortgages or like
         instruments establishing or otherwise giving effect to the liens and
         security interests in the collateral, including UCC financing
         statements and notice filings in respect of intellectual property, in
         each case as amended and modified.

                  "Copyright License" means any written agreement, naming any
         Grantor as licensor, granting any right under any Copyright including,
         without limitation, any thereof referred to in Schedule 1(b) attached
         hereto.
<PAGE>
                  "Copyrights" means (a) all registered United States copyrights
         in all Works, now existing or hereafter created or acquired, all
         registrations and recordings thereof, and all applications in
         connection therewith, including, without limitation, registrations,
         recordings and applications in the United States Copyright Office
         including, without limitation, any thereof referred to in Schedule 1(b)
         attached hereto, and (b) all renewals thereof including, without
         limitation, any thereof referred to in Schedule 1(b) attached hereto.

                  "Credit Agreement" means the SpaceCom Credit Agreement, or if
         the SpaceCom Credit Agreement has expired or been terminated, all
         Commitments thereunder have been terminated, no Letter of Credit shall
         remain outstanding and all amounts owing thereunder shall have been
         paid in full, the Satellite Credit Agreement.

                  "Credit Documents" means the SpaceCom Credit Documents and the
         Satellite Credit Documents.

                  "Event of Default" has the meaning provided in Section 7
         hereof.

                  "Patent License" means any agreement, whether written or oral,
         providing for the grant by or to a Grantor of any right to manufacture,
         use or sell any invention covered by a Patent, including, without
         limitation, any thereof referred to in Schedule 1(b) attached hereto.

                  "Patents" means (a) all letters patent of the United States or
         any other country and all reissues and extensions thereof, including,
         without limitation, any letters patent referred to in Schedule 1(b)
         attached hereto, and (b) all applications for letters patent of the
         United States or any other country and all divisions, continuations and
         continuations-in-part thereof, including, without limitation, any
         thereof referred to in Schedule 1(b) attached hereto.

                  "Permitted Liens" means Liens which are permitted pursuant to
         Section 9.3 of the Credit Agreement.

                  "Revised Article 9" means the 1999 revision of Article 9 of
         the UCC, in the form or substantially in the form approved by The
         American Law Institute and the National Conference of Commissioners on
         Uniform State Laws and as set forth in Appendix XVI of the 1999 edition
         of the Official Text of the Uniform Commercial Code, as amended.

                  "Satellite Credit Documents" means (i) the Satellite Credit
         Agreement, the notes issued thereunder and the other credit documents
         referenced therein relating thereto, as amended, modified, extended or
         replaced, and (ii) the Collateral Documents.

                  "Satellite Indebtedness" means all of the following, whether
         now or hereafter outstanding or incurred: (i) the principal of and
         interest (including interest accruing after commencement of a
         proceeding in bankruptcy, reorganization or insolvency, whether or not
         allowable as a claim) on the loans and obligations, and all other
         amounts (including, without limitation, all fees, indemnities, charges,
         expenses and other monetary obligations), owing from time to time under
         the Satellite Credit Agreement or any of the other Satellite Credit
         Documents; (ii) subject to Section 26 hereof, all guaranty obligations
         given in respect of the Satellite Indebtedness; and (iii) all renewals,
         extensions, refinancings, refundings, amendments and modifications of
         any of the foregoing Satellite Indebtedness, whether in whole or in
         part.

                  "Secured Obligations" means the SpaceCom Indebtedness and the
         Satellite Indebtedness.

                                       2
<PAGE>
                  "SpaceCom Credit Documents" means (i) the SpaceCom Credit
         Agreement, the notes issued thereunder and the other credit documents
         referenced therein relating thereto, as amended, modified, extended or
         replaced, (ii) the interest rate protection or foreign currency
         exchange agreements, the obligations under which constitute SpaceCom
         Indebtedness hereunder, and (iii) the Collateral Documents.

                  "SpaceCom Indebtedness" means all of the following, whether
         now or hereafter outstanding or incurred: (i) the principal of and
         interest (including interest accruing after commencement of a
         proceeding in bankruptcy, reorganization or insolvency, whether or not
         allowable as a claim) on the loans and obligations, and all other
         amounts (including, without limitation, all reimbursement obligations,
         fees, indemnities, charges, expenses and other monetary obligations),
         owing from time to time under the SpaceCom Credit Agreement and the
         other SpaceCom Credit Documents; (ii) subject to Section 26 hereof, the
         guaranty obligations of the guarantors under the SpaceCom Credit
         Agreement and the other SpaceCom Credit Documents; (iii) the
         obligations owing by the Company, or a subsidiary or affiliate of the
         Company, to any lender or affiliate of a lender under the SpaceCom
         Credit Agreement arising under any interest rate protection or foreign
         currency exchange agreement or any guaranty given in respect thereof
         (unless the foregoing specifies that such obligations are not SpaceCom
         Indebtedness); and (iv) all amendments, modifications, renewals,
         extensions, refinancings, refundings and restructurings of any of the
         foregoing SpaceCom Indebtedness, whether in whole or in part, and the
         agreements governing such SpaceCom Indebtedness; provided, however,
         that under no circumstances shall the obligations owing under the
         Collateral Documents to the lenders and the administrative agent under
         the Satellite Credit Agreement be considered SpaceCom Indebtedness.

                  "Trademark License" means any agreement, written or oral,
         providing for the grant by or to a Grantor of any right to use any
         Trademark, including, without limitation, any thereof referred to in
         Schedule 1(b) attached hereto.

                  "Trademarks" means (a) all trademarks, trade names, corporate
         names, company names, business names, fictitious business names, trade
         styles, service marks, logos and other source or business identifiers,
         and the goodwill associated therewith, now existing or hereafter
         adopted or acquired, all registrations and recordings thereof, and all
         applications in connection therewith, whether in the United States
         Patent and Trademark Office or in any similar office or agency of the
         United States, any state thereof or any other country or any political
         subdivision thereof, or otherwise, including, without limitation, any
         thereof referred to in Schedule 1(b) attached hereto, and (b) all
         renewals thereof.

                  "UCC" means the Uniform Commercial Code.

                  "Work" means any work that is subject to copyright protection
         pursuant to Title 17 of the United States Code.

         2. Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time,
acceleration, mandatory prepayment or otherwise, of the Secured Obligations,
each Grantor hereby grants to the Collateral Agent, for the benefit of the
holders of the Secured Obligations, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Grantor
in and to all personal property of the Grantors of whatever type or description,
whether now owned or existing or owned, acquired, or arising hereafter
(collectively, the "Collateral"), including, without limitation, the following:

                  (a) all Accounts;

                                       3
<PAGE>
                  (b) all cash and currency;

                  (c) all Chattel Paper (including all transponder lease and
         sublease agreements);

                  (d) all Commercial Tort Claims identified on Schedule 2(d)
         attached hereto;

                  (e) all Copyrights;

                  (f) all Copyright Licenses;

                  (g) all Deposit Accounts;

                  (h) all Documents;

                  (i) all Equipment (including all satellites and transponders);

                  (j) all Fixtures;

                  (k) all General Intangibles (including, to the extent
         permitted by applicable law, all FCC licenses);

                  (l) all Instruments;

                  (m) all Inventory;

                  (n) all Investment Property;

                  (o) all Letter-of-Credit Rights;

                  (p) all Patents;

                  (q) all Patent Licenses;

                  (r) all Software;

                  (s) all Supporting Obligations;

                  (t) all Trademarks;

                  (u) all Trademark Licenses; and

                  (v) to the extent not otherwise included, all Accessions and
         all Proceeds of any and all of the foregoing;

         provided that, notwithstanding anything contained in this Security
         Agreement to the contrary, the security interests granted under this
         Security Agreement shall not extend to (i) any property which is
         subject to a Lien of the type described in clauses (f), (g), (i), (k)
         and (m) of Section 9.3 of the Credit Agreement pursuant to documents
         which prohibit such Grantor from granting any other Liens in such
         property or (ii) any lease, license or other contract if the grant of a
         security interest therein in the manner contemplated by this Security
         Agreement is, under the terms thereof and under applicable law, (x)
         prohibited and (y) would result in the termination thereof, unless
         consent from the relevant

                                       4
<PAGE>
         party or parties has been obtained and in any case only to the extent
         that such prohibition is not (or could not be) rendered ineffective
         pursuant to the UCC or any other applicable law (including the
         Bankruptcy Code) or principles of equity.

         The Grantors and the Collateral Agent, on behalf of the holders of the
Secured Obligations, hereby acknowledge and agree that the security interest
created hereby in the Collateral (i) constitutes continuing collateral security
for all of the Secured Obligations, whether now existing or hereafter arising
and (ii) is not to be construed as an assignment of any Copyrights, Copyright
Licenses, Patents, Patent Licenses, Trademarks or Trademark Licenses.

         3. Provisions Relating to Accounts.

                  (a) Anything herein to the contrary notwithstanding, each of
         the Grantors shall remain liable under each of the Accounts to observe
         and perform all the conditions and obligations to be observed and
         performed by it thereunder, all in accordance with the terms of any
         agreement giving rise to each such Account. Neither the Collateral
         Agent nor any holder of the Secured Obligations shall have any
         obligation or liability under any Account (or any agreement giving rise
         thereto) by reason of or arising out of this Security Agreement or the
         receipt by the Collateral Agent or any holder of the Secured
         Obligations of any payment relating to such Account pursuant hereto,
         nor shall the Collateral Agent or any holder of the Secured Obligations
         be obligated in any manner to perform any of the obligations of a
         Grantor under or pursuant to any Account (or any agreement giving rise
         thereto), to make any payment, to make any inquiry as to the nature or
         the sufficiency of any payment received by it or as to the sufficiency
         of any performance by any party under any Account (or any agreement
         giving rise thereto), to present or file any claim, to take any action
         to enforce any performance or to collect the payment of any amounts
         which may have been assigned to it or to which it may be entitled at
         any time or times.

                  (b) At any time after the occurrence and during the
         continuance of an Event of Default, the Collateral Agent shall have the
         right, but not the obligation, to make test verifications of the
         Accounts in any manner and through any medium that it reasonably
         considers advisable, and the Grantors shall furnish all such assistance
         and information as the Collateral Agent may require in connection with
         such test verifications. At any time after the occurrence and during
         the continuance of an Event of Default, upon the Collateral Agent's
         request and at the expense of the Grantors, the Grantors shall cause
         independent public accountants or others satisfactory to the Collateral
         Agent to furnish to the Collateral Agent reports showing
         reconciliations, aging and test verifications of, and trial balances
         for, the Accounts. At any time after the occurrence and during the
         continuance of an Event of Default, the Collateral Agent in its own
         name or in the name of others may communicate with account debtors on
         the Accounts to verify with them to the Collateral Agent's satisfaction
         the existence, amount and terms of any Accounts.

         4. Representations and Warranties. Each Grantor hereby represents and
warrants to the Collateral Agent, for the benefit of the holders of the Secured
Obligations, that so long as any of the Secured Obligations (other than any such
obligations that, by their terms, survive termination of the Credit Documents),
remains outstanding and until all of the commitments relating thereto have been
terminated:

                  (a) Legal Name; Chief Executive Office. As of the Closing
         Date:

                           (i) Each Grantor's exact legal name, state of
                  incorporation or formation, principal place of business and
                  chief executive office are (and for the four months prior to
                  the date hereof has been) as set forth on Schedule 4(a)(i)
                  attached hereto.

                                       5
<PAGE>
                           (ii) Other than as set forth on Schedule 4(a)(ii)
                  attached hereto, no Grantor has been party to a merger,
                  consolidation or other change in structure or used any
                  tradename in the four months prior to the date hereof.

                  (b) Location of Collateral. As of the Closing Date, other than
         as set forth on Schedule 4(b) attached hereto, no Collateral is (or for
         the four months prior to the date hereof has been) located in any
         jurisdiction in which Revised Article 9 is not yet in effect.

                  (c) Ownership. Each Grantor is the legal and beneficial owner
         of its Collateral and has the right to pledge, sell or transfer the
         same.

                  (d) Security Interest/Priority. This Security Agreement
         creates a valid security interest in favor of the Collateral Agent, for
         the benefit of the holders of the Secured Obligations, in the
         Collateral of such Grantor and, when properly perfected by filing,
         shall constitute a valid perfected security interest in such
         Collateral, to the extent such security interest can be perfected by
         filing under the UCC, free and clear of all Liens except for Permitted
         Liens.

                  (e) Types of Collateral. Except as disclosed to the
         Administrative Agent, none of the Collateral consists of, or is the
         Accessions or the Proceeds of, As-Extracted Collateral, Consumer Goods,
         Farm Products, Manufactured Homes, or Standing Timber.

                  (f) Accounts. (i) Except as disclosed to the Administrative
         Agent, each Account of the Grantors and the papers and documents
         relating thereto are genuine and in all material respects what they
         purport to be, (ii) except as disclosed to the Administrative Agent,
         each Account arises out of (A) a bona fide sale of goods sold and
         delivered by such Grantor (or is in the process of being delivered) or
         (B) services theretofore actually rendered by such Grantor to, the
         account debtor named therein and (iii) no Account of a Grantor is
         evidenced by any Instrument or Chattel Paper unless such Instrument or
         Chattel Paper has been theretofore endorsed over and delivered to, or
         submitted to the control of, the Collateral Agent.

                  (g) Inventory. Except as disclosed to the Administrative
         Agent, no Inventory of a Grantor is held by a third party (other than a
         Grantor) pursuant to consignment, sale or return, sale on approval or
         similar arrangement.

                  (h) Copyrights, Patents and Trademarks. As of the Closing
         Date:

                           (i) Schedule 1(b) attached hereto includes all
                  material Copyrights, Copyright Licenses, Patents, Patent
                  Licenses, Trademarks and Trademark Licenses owned by any
                  Grantor in its own name, or to which any Grantor is a party,
                  as of the date hereof.

                           (ii) No Grantor has made any assignment or agreement
                  in conflict with the security interest in the Copyrights,
                  Patents or Trademarks of any Grantor hereunder.

         5. Covenants. Each Grantor covenants that, so long as any of the
Secured Obligations (other than any such obligations that, by their terms,
survive termination of the Credit Documents) remains outstanding and until all
of the commitments relating thereto have been terminated, such Grantor shall:

                  (a) Other Liens. Defend the Collateral against the claims and
         demands of all other parties claiming an interest therein, keep the
         Collateral free from all Liens, except for Permitted Liens, and not
         sell, exchange, transfer, assign, lease or otherwise dispose of the
         Collateral or any interest therein, except as permitted under the
         Credit Agreement.

                                       6
<PAGE>
                  (b) Instruments/Tangible Chattel Paper/Documents. If any
         amount payable under or in connection with any of the Collateral shall
         be or become evidenced by any Instrument or Tangible Chattel Paper, or
         if any property constituting Collateral shall be stored or shipped
         subject to a Document, such Grantor shall ensure that such Instrument,
         Tangible Chattel Paper or Document is either in the possession of such
         Grantor at all times or, if requested by the Collateral Agent, is
         immediately delivered to the Collateral Agent, duly endorsed in a
         manner satisfactory to the Collateral Agent. Such Grantor shall ensure
         that any Collateral consisting of Tangible Chattel Paper is marked with
         a legend acceptable to the Collateral Agent indicating the Collateral
         Agent's security interest in such Tangible Chattel Paper.

                  (c) Change in Structure, Location or Type. Not, without
         providing ten days prior written notice to the Collateral Agent and
         without filing (or confirming that the Collateral Agent has filed) such
         financing statements and amendments to any previously filed financing
         statements as the Collateral Agent may require:

                           (i) change its name or state of formation or be party
                  to a merger, consolidation or other change in structure or use
                  any tradename other than as set forth on Schedule 4(a)(ii)
                  attached hereto, or

                           (ii) allow any of its Collateral to be moved to any
                  jurisdiction in which Revised Article 9 is not yet in effect.

                  (d) Inspection. Upon reasonable notice, and during reasonable
         hours, at all times allow the Collateral Agent or its representatives
         to visit and inspect the Collateral as set forth in the Credit
         Agreement.

                  (e) Authorization. Authorize the Collateral Agent to prepare
         and file such financing statements (including renewal statements),
         amendments and supplements or such other instruments as the Collateral
         Agent may from time to time reasonably deem necessary, appropriate or
         convenient in order to perfect and maintain the security interests
         granted hereunder in accordance with the UCC.

                  (f) Perfection of Security Interest. Execute and deliver to
         the Collateral Agent such agreements, assignments or instruments
         (including affidavits, notices, reaffirmations and amendments and
         restatements of existing documents, as the Collateral Agent may
         reasonably request) and do all such other things as the Collateral
         Agent may reasonably deem necessary, appropriate or convenient (i) to
         assure to the Collateral Agent the effectiveness and priority of its
         security interests hereunder, including (A) such financing statements
         (including renewal statements), amendments and supplements or such
         other instruments as the Collateral Agent may from time to time
         reasonably request in order to perfect and maintain the security
         interests granted hereunder in accordance with the UCC, (B) with regard
         to Copyrights, a Notice of Grant of Security Interest in Copyrights for
         filing with the United States Copyright Office substantially in the
         form of Schedule 5(f)(i) attached hereto, (C) with regard to Patents, a
         Notice of Grant of Security Interest in Patents for filing with the
         United States Patent and Trademark Office substantially in the form of
         Schedule 5(f)(ii) attached hereto and (D) with regard to Trademarks, a
         Notice of Grant of Security Interest in Trademarks for filing with the
         United States Patent and Trademark Office substantially in the form of
         Schedule 5(f)(iii) attached hereto, (ii) to consummate the transactions
         contemplated hereby and (iii) to otherwise protect and assure the
         Collateral Agent of its rights and interests hereunder. To that end,
         each Grantor agrees that the Collateral Agent may file one or more
         financing statements disclosing the Collateral Agent's security
         interest in any or all of the Collateral of such Grantor without, to
         the extent permitted by law, such Grantor's signature thereon
         (including UCC financing statements with descriptions of collateral
         broader than the granting clause), and further each Grantor also hereby
         irrevocably makes, constitutes and appoints the Collateral Agent, its
         nominee or any

                                       7
<PAGE>
         other Person whom the Collateral Agent may designate, as such Grantor's
         attorney-in-fact with full power and for the limited purpose to sign in
         the name of such Grantor any such financing statements (including
         renewal statements), amendments and supplements, notices or any similar
         documents which in the Collateral Agent's reasonable discretion would
         be necessary, appropriate or convenient in order to perfect and
         maintain perfection of the security interests granted hereunder, such
         power, being coupled with an interest, being and remaining irrevocable
         so long as the Secured Obligations (other than any such obligations
         that, by the terms, survive termination of the Credit Documents),
         remain unpaid and until the commitments relating thereto shall have
         been terminated. Each Grantor hereby agrees that a carbon, photographic
         or other reproduction of this Security Agreement or any such financing
         statement is sufficient for filing as a financing statement by the
         Collateral Agent without notice thereof to such Grantor wherever the
         Collateral Agent may in its sole discretion desire to file the same. In
         the event for any reason the law of any jurisdiction other than New
         York becomes or is applicable to the Collateral of any Grantor or any
         part thereof, or to any of the Secured Obligations, such Grantor agrees
         to execute and deliver all such instruments and to do all such other
         things as the Collateral Agent in its sole discretion reasonably deems
         necessary, appropriate or convenient to preserve, protect and enforce
         the security interests of the Collateral Agent under the law of such
         other jurisdiction (and, if a Grantor shall fail to do so promptly upon
         the request of the Collateral Agent, then the Collateral Agent may
         execute any and all such requested documents on behalf of such Grantor
         pursuant to the power of attorney granted hereinabove). If any
         Collateral is in the possession or control of a Grantor's agents and
         the Collateral Agent so requests, such Grantor agrees to notify such
         agents in writing of the Collateral Agent's security interest therein
         and, upon the Collateral Agent's request, instruct them to hold all
         such Collateral for the account of the holders of the Secured
         Obligations and subject to the Collateral Agent's instructions. Each
         Grantor agrees to mark its books and records to reflect the security
         interest of the Collateral Agent in the Collateral.

                  (g) Control. Execute and deliver all agreements, assignments,
         instruments or other documents as the Collateral Agent shall reasonably
         request for the purpose of obtaining and maintaining control within the
         meaning of the UCC with respect to any Collateral consisting of Deposit
         Accounts, Investment Property, Letter-of-Credit Rights and Electronic
         Chattel Paper.

                  (h) Collateral held by Warehouseman, Bailee, etc. If any
         Collateral is at any time in the possession or control of a
         warehouseman, bailee, agent or processor of such Grantor, (i) notify
         the Collateral Agent of such possession or control, (ii) notify such
         Person of the Collateral Agent's security interest in such Collateral
         and (iii) instruct such Person to hold all such Collateral for the
         Collateral Agent's account and subject to the Collateral Agent's
         instructions.

                  (i) Treatment of Accounts. Not grant or extend the time for
         payment of any Account, or compromise or settle any Account for less
         than the full amount thereof, or release any Person or property, in
         whole or in part, from payment thereof, or allow any credit or discount
         thereon, other than in the ordinary course of a Grantor's business or
         as required by law.

                  (j) Covenants Relating to Copyrights. Unless the applicable
         Grantor believes it is not necessary in the prudent conduct of its
         business:

                           (i) Employ the Copyright for each Work with such
                  notice of copyright as may be required by law to secure
                  copyright protection.

                           (ii) Not do any act or knowingly omit to do any act
                  whereby any material Copyright may become invalidated and (A)
                  not do any act, or knowingly omit to do any act, whereby any
                  material Copyright may become injected into the public domain;
                  (B) notify the Collateral Agent promptly if it knows that any
                  material Copyright may become injected into the public domain
                  or of any adverse determination or development (including,
                  without

                                       8
<PAGE>
                  limitation, the institution of, or any such determination or
                  development in, any court or tribunal in the United States or
                  any other country) regarding a Grantor's ownership of any such
                  Copyright or its validity; (C) take all necessary steps as it
                  shall deem appropriate under the circumstances, to maintain
                  and pursue each application (and to use its best efforts to
                  obtain the relevant registration) and to maintain each
                  registration of each material Copyright owned by a Grantor
                  including, without limitation, filing of applications for
                  renewal where necessary; and (D) promptly notify the
                  Collateral Agent of any material infringement of any material
                  Copyright of a Grantor of which it becomes aware and take such
                  actions as it shall reasonably deem appropriate under the
                  circumstances to protect such Copyright, including, where
                  appropriate, the bringing of suit for infringement, seeking
                  injunctive relief and seeking to recover any and all damages
                  for such infringement.

                           (iii) Not make any assignment or agreement in
                  conflict with the security interest in the Copyrights of each
                  Grantor hereunder.

                  (k) Covenants Relating to Patents and Trademarks. Unless the
         applicable Grantor believes it is not necessary in the prudent conduct
         of its business:

                           (i) (A) Continue to use each Trademark on each and
                  every trademark class of goods applicable to its current line
                  as reflected in its current catalogs, brochures and price
                  lists in order to maintain such Trademark in full force free
                  from any claim of abandonment for non-use, (B) maintain as in
                  the past the quality of products and services offered under
                  such Trademark, (C) employ such Trademark with the appropriate
                  notice of registration or notice of trademark or service mark,
                  as applicable, sufficient to protect such Trademark, (D) not
                  adopt or use any mark which is confusingly similar or a
                  colorable imitation of such Trademark unless the Collateral
                  Agent, for the ratable benefit of the holders of the Secured
                  Obligations, shall obtain a perfected security interest in
                  such mark pursuant to this Security Agreement, and (E) not
                  (and not permit any licensee or sublicensee thereof to) do any
                  act or knowingly omit to do any act whereby any Trademark may
                  become invalidated.

                           (ii) Not do any act, or omit to do any act, whereby
                  any Patent may become abandoned or dedicated.

                           (iii) Notify the Collateral Agent and the holders of
                  the Secured Obligations promptly if it knows that any
                  application or registration relating to any material Patent or
                  material Trademark may become abandoned or dedicated, or of
                  any adverse determination or development (including, without
                  limitation, the institution of, or any such determination or
                  development in, any proceeding in the United States Patent and
                  Trademark Office or any court or tribunal in any country)
                  regarding a Grantor's ownership of any Patent or Trademark or
                  its right to register the same or to keep and maintain the
                  same.

                           (iv) Whenever a Grantor, either by itself or through
                  an agent, employee, licensee or designee, shall file an
                  application for the registration of any Patent or Trademark
                  with the United States Patent and Trademark Office or any
                  similar office or agency in any other country or any political
                  subdivision thereof, a Grantor shall report such filing to the
                  Collateral Agent and the holders of the Secured Obligations
                  within five Business Days after the last day of the fiscal
                  quarter in which such filing occurs. Upon request of the
                  Collateral Agent, a Grantor shall execute and deliver any and
                  all agreements, instruments, documents and papers as the
                  Collateral Agent may reasonably request to evidence the
                  security interest of the Collateral Agent and the holders of
                  the Secured Obligations in any Patent or Trademark and the
                  goodwill and general intangibles of a Grantor relating thereto
                  or represented thereby.

                                       9
<PAGE>
                           (v) Take all reasonable and necessary steps,
                  including, without limitation, in any proceeding before the
                  United States Patent and Trademark Office, or any similar
                  office or agency in any other country or any political
                  subdivision thereof, to maintain and pursue each application
                  (and to obtain the relevant registration) and to maintain each
                  registration of the Patents and Trademarks, including, without
                  limitation, filing of applications for renewal, affidavits of
                  use and affidavits of incontestability.

                           (vi) Promptly notify the Collateral Agent and the
                  holders of the Secured Obligations after it learns that any
                  material Patent or material Trademark included in the
                  Collateral is infringed, misappropriated or diluted in any
                  material manner by a third party, and take such actions as it
                  shall reasonably deem appropriate under the circumstances to
                  protect such Patent or Trademark, including, where it shall
                  reasonably deem appropriate, the bringing of suit for
                  infringement, misappropriation or dilution, seeking injunctive
                  relief where appropriate and seeking to recover any and all
                  damages for such infringement, misappropriation or dilution,
                  or taking such other actions as it shall reasonably deem
                  appropriate under the circumstances to protect such Patent or
                  Trademark.

                           (vii) Not make any assignment or agreement in
                  conflict with the security interest in the Patents or
                  Trademarks of each Grantor hereunder except as permitted under
                  the Credit Agreement.

                  (l) New Patents, Copyrights and Trademarks. Promptly provide
         the Collateral Agent with (i) a listing of all applications, if any,
         for new material Copyrights, Patents or Trademarks (together with a
         listing of the issuance of registrations or letters on present
         applications), which new applications and issued registrations or
         letters shall be subject to the terms and conditions hereunder, and
         (ii) (A) with respect to Copyrights, a duly executed Notice of Security
         Interest in Copyrights, (B) with respect to Patents, a duly executed
         Notice of Security Interest in Patents, (C) with respect to Trademarks,
         a duly executed Notice of Security Interest in Trademarks or (D) such
         other duly executed documents as the Collateral Agent may reasonably
         request in a form acceptable to counsel for the Collateral Agent and
         suitable for recording to evidence the security interest in the
         Copyright, Patent or Trademark which is the subject of such new
         application.

                  (m) Insurance. Insure, repair and replace the Collateral of
         such Grantor as set forth in the Credit Agreement. All insurance
         proceeds shall be subject to the security interest of the Collateral
         Agent hereunder.

                  (n) Commercial Tort Claims.

                           (i) Promptly notify the Collateral Agent in writing
                  of the initiation of any Commercial Tort Claim before any
                  Governmental Authority by or affecting such Grantor or any of
                  its Subsidiaries.

                           (ii) Execute and deliver such statements, documents
                  and notices and do and cause to be done all such things as the
                  Collateral Agent may reasonably deem necessary, appropriate or
                  convenient, or as are required by law, to create, perfect and
                  maintain the Collateral Agent's security interest in any
                  Commercial Tort Claim.

         6. Advances by Holders of the Secured Obligations. On failure of any
Grantor to perform any of the covenants and agreements contained herein, the
Collateral Agent may, at its sole option and in its reasonable discretion,
perform the same (provided that the Collateral Agent shall promptly give the
Borrower notice of such performance after the fact) and in so doing may expend
such sums as the Collateral Agent may

                                       10
<PAGE>
reasonably deem advisable in the performance thereof, including, without
limitation, the payment of any insurance premiums, the payment of any taxes, a
payment to obtain a release of a Lien or potential Lien, expenditures made in
defending against any adverse claim and all other expenditures which the
Collateral Agent or the holders of the Secured Obligations may make for the
protection of the security hereof or which may be compelled to make by operation
of law. All such sums and amounts so expended shall be repayable by the Grantors
on a joint and several basis (subject to Section 26 hereof) promptly upon timely
notice thereof and demand therefor, shall constitute additional Secured
Obligations and shall bear interest from the date said amounts are expended at
the default rate specified in the Credit Agreement for Revolving Loans that are
Base Rate Loans. No such performance of any covenant or agreement by the
Collateral Agent or the holders of the Secured Obligations on behalf of any
Grantor, and no such advance or expenditure therefor, shall relieve the Grantors
of any default under the terms of this Security Agreement, the other Credit
Documents or any other documents relating to the Secured Obligations. The
holders of the Secured Obligations may make any payment hereby authorized in
accordance with any bill, statement or estimate procured from the appropriate
public office or holder of the claim to be discharged without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien, title or claim except to the extent such
payment is being contested in good faith by a Grantor in appropriate proceedings
and against which adequate reserves are being maintained in accordance with
GAAP.

         7. Events of Default.

         The occurrence of an event which would constitute an Event of Default
under the Credit Agreement shall be an event of default hereunder (an "Event of
Default").

         8. Remedies.

                  (a) General Remedies. Upon the occurrence of an Event of
         Default and during the continuance thereof, the Collateral Agent and
         the holders of the Secured Obligations shall have, in addition to the
         rights and remedies provided herein, in the Credit Documents, in any
         other documents relating to the Secured Obligations, or by law
         (including, without limitation, levy of attachment and garnishment),
         the rights and remedies of a secured party under the UCC of the
         jurisdiction applicable to the affected Collateral and, further, the
         Collateral Agent may, with or without judicial process or the aid and
         assistance of others to the extent permitted by applicable law, (i)
         enter on any premises on which any of the Collateral may be located
         and, without resistance or interference by the Grantors, take
         possession of the Collateral, (ii) dispose of any Collateral on any
         such premises, (iii) require the Grantors to assemble and make
         available to the Collateral Agent at the expense of the Grantors any
         Collateral at any place and time designated by the Collateral Agent
         which is reasonably convenient to both parties, (iv) remove any
         Collateral from any such premises for the purpose of effecting sale or
         other disposition thereof, and/or (v) without demand and without
         advertisement, notice, hearing or process of law, all of which each of
         the Grantors hereby waives to the fullest extent permitted by law, at
         any place and time or times, sell and deliver any or all Collateral
         held by or for it at public or private sale, by one or more contracts,
         in one or more parcels, for cash, upon credit or otherwise, at such
         prices and upon such terms as the Collateral Agent deems advisable, in
         its sole discretion (subject to any and all mandatory legal
         requirements). Each of the Grantors acknowledges that any private sale
         referenced above may be at prices and on terms less favorable to the
         seller than the prices and other terms which might have been obtained
         at a public sale and, notwithstanding the foregoing, agrees that such
         private sale shall be deemed to have been made in a commercially
         reasonable manner. In addition to all other sums due the Collateral
         Agent and the holders of the Secured Obligations with respect to the
         Secured Obligations, the Grantors shall pay the Collateral Agent and
         each of the holders of the Secured Obligations all reasonable costs and
         expenses incurred by the Collateral Agent or any such holder of the
         Secured Obligations, including, but not limited to, reasonable
         attorneys' fees and court costs, in obtaining or liquidating the
         Collateral, in enforcing payment of the Secured Obligations, or in the
         prosecution or defense of any action or proceeding by

                                       11
<PAGE>
         or against the Collateral Agent or the holders of the Secured
         Obligations or the Grantors concerning any matter arising out of or
         connected with this Security Agreement, any Collateral or the Secured
         Obligations, including, without limitation, any of the foregoing
         arising in, arising under or related to a case concerning a Grantor
         under the Bankruptcy Code. To the extent the rights of notice cannot be
         legally waived hereunder, each Grantor agrees that any requirement of
         reasonable notice shall be met if such notice is personally served on
         or mailed, postage prepaid, to the Company in accordance with the
         notice provisions of the Credit Agreement at least ten days before the
         time of sale or other event giving rise to the requirement of such
         notice. The Collateral Agent and the holders of the Secured Obligations
         shall not be obligated to make any sale or other disposition of the
         Collateral regardless of notice having been given. To the extent
         permitted by law, any holder of the Secured Obligations may be a
         purchaser at any such sale. To the extent permitted by applicable law,
         each of the Grantors hereby waives all of its rights of redemption with
         respect to any such sale. Subject to the provisions of applicable law,
         the Collateral Agent and the holders of the Secured Obligations may
         postpone or cause the postponement of the sale of all or any portion of
         the Collateral by announcement at the time and place of such sale, and
         such sale may, without further notice, to the extent permitted by law,
         be made at the time and place to which the sale was postponed, or the
         Collateral Agent and the holders of the Secured Obligations may further
         postpone such sale by announcement made at such time and place.

                  (b) Remedies relating to Accounts. Upon the occurrence of an
         Event of Default and during the continuance thereof, whether or not the
         Collateral Agent has exercised any or all of its rights and remedies
         hereunder, each Grantor will promptly upon request of the Collateral
         Agent instruct all account debtors to remit all payments in respect of
         Accounts to a mailing location selected by the Collateral Agent. In
         addition, the Collateral Agent shall have the right to enforce any
         Grantor's rights against its customers and account debtors, and the
         Collateral Agent or its designee may notify any Grantor's customers and
         account debtors that the Accounts of such Grantor have been assigned to
         the Collateral Agent or of the Collateral Agent's security interest
         therein, and may (either in its own name or in the name of a Grantor or
         both) demand, collect (including without limitation by way of a lockbox
         arrangement), receive, take receipt for, sell, sue for, compound,
         settle, compromise and give acquittance for any and all amounts due or
         to become due on any Account, and, in the Collateral Agent's
         discretion, file any claim or take any other action or proceeding to
         protect and realize upon the security interest of the holders of the
         Secured Obligations in the Accounts. Each Grantor acknowledges and
         agrees that the Proceeds of its Accounts remitted to or on behalf of
         the Collateral Agent in accordance with the provisions hereof shall be
         solely for the Collateral Agent's own convenience and that such Grantor
         shall not have any right, title or interest in such Accounts or in any
         such other amounts except as expressly provided herein. The Collateral
         Agent and the holders of the Secured Obligations shall have no
         liability or responsibility to any Grantor for acceptance of a check,
         draft or other order for payment of money bearing the legend "payment
         in full" or words of similar import or any other restrictive legend or
         endorsement or be responsible for determining the correctness of any
         remittance. Each Grantor hereby agrees to indemnify the Collateral
         Agent and the holders of the Secured Obligations from and against all
         liabilities, damages, losses, actions, claims, judgments, costs,
         expenses, charges and reasonable attorneys' fees suffered or incurred
         by the Collateral Agent or the holders of the Secured Obligations
         (each, an "Indemnified Party") because of the maintenance of the
         foregoing arrangements except as relating to or arising out of the
         gross negligence or willful misconduct of an Indemnified Party or its
         officers, employees or agents. In the case of any investigation,
         litigation or other proceeding, the foregoing indemnity shall be
         effective whether or not such investigation, litigation or proceeding
         is brought by a Grantor, its directors, shareholders or creditors or an
         Indemnified Party or any other Person or any other Indemnified Party is
         otherwise a party thereto.

                  (c) Access. In addition to the rights and remedies hereunder,
         upon the occurrence of an Event of Default and during the continuance
         thereof, the Collateral Agent shall have the right to enter

                                       12
<PAGE>
         and remain upon the various premises of the Grantors without cost or
         charge to the Collateral Agent, and use the same, together with
         materials, supplies, books and records of the Grantors for the purpose
         of collecting and liquidating the Collateral, or for preparing for sale
         and conducting the sale of the Collateral, whether by foreclosure,
         auction or otherwise. In addition, the Collateral Agent may remove
         Collateral, or any part thereof, from such premises and/or any records
         with respect thereto, in order to effectively collect or liquidate such
         Collateral.

                  (d) Nonexclusive Nature of Remedies. Failure by the Collateral
         Agent or the holders of the Secured Obligations to exercise any right,
         remedy or option under this Security Agreement, any other Credit
         Document, any other documents relating to the Secured Obligations, or
         as provided by law, or any delay by the Collateral Agent or the holders
         of the Secured Obligations in exercising the same, shall not operate as
         a waiver of any such right, remedy or option. No waiver hereunder shall
         be effective unless it is in writing, signed by the party against whom
         such waiver is sought to be enforced and then only to the extent
         specifically stated, which in the case of the Collateral Agent or the
         holders of the Secured Obligations shall only be granted as provided
         herein. To the extent permitted by law, neither the Collateral Agent,
         the holders of the Secured Obligations, nor any party acting as
         attorney for the Collateral Agent or the holders of the Secured
         Obligations, shall be liable hereunder for any acts or omissions or for
         any error of judgment or mistake of fact or law other than their gross
         negligence or willful misconduct hereunder. The rights and remedies of
         the Collateral Agents and the holders of the Secured Obligations under
         this Security Agreement shall be cumulative and not exclusive of any
         other right or remedy which the Collateral Agent or the holders of the
         Secured Obligations may have.

                  (e) Retention of Collateral. To the extent permitted under
         applicable law, in addition to the rights and remedies hereunder, upon
         the occurrence of an Event of Default, the Collateral Agent may, after
         providing the notices required by Sections 9-620 and 9-621 of the UCC
         or otherwise complying with the requirements of applicable law of the
         relevant jurisdiction, accept or retain all or any portion of the
         Collateral in satisfaction of the Secured Obligations. Unless and until
         the Collateral Agent shall have provided such notices, however, the
         Collateral Agent shall not be deemed to have accepted or retained any
         Collateral in satisfaction of any Secured Obligations for any reason.

                  (f) Deficiency. In the event that the proceeds of any sale,
         collection or realization are insufficient to pay all amounts to which
         the Collateral Agent or the holders of the Secured Obligations are
         legally entitled, the Grantors (subject to Section 26 hereof) shall be
         jointly and severally liable for the deficiency, together with interest
         thereon at the default rate specified in the Credit Agreement for
         Revolving Loans that are Base Rate Loans, together with the costs of
         collection and reasonable fees of attorneys employed by the Collateral
         Agent to collect such deficiency. Any surplus remaining after the full
         payment and satisfaction of the Secured Obligations shall be returned
         to the Grantors or to whomsoever a court of competent jurisdiction
         shall determine to be entitled thereto.

         9. Release of Collateral. Upon request, the Collateral Agent shall
promptly deliver to the Company (at the Company's expense) appropriate release
documentation to the extent the release of Collateral is permitted under, and on
the terms and conditions set forth in, the Credit Agreement; provided that any
such release, or the substitution of any of the Collateral for other Collateral,
will not alter, vary or diminish in any way the force, effect, lien, pledge or
security interest of this Security Agreement as to any and all Collateral not
expressly released or substituted, and this Security Agreement shall continue as
a first priority lien (subject to Permitted Liens) on any and all Collateral not
expressly released or substituted.

                                       13
<PAGE>
         10. Rights of the Collateral Agent.

                  (a) Power of Attorney. In addition to other powers of attorney
         contained herein, each Grantor hereby designates and appoints the
         Collateral Agent, on behalf of the holders of the Secured Obligations,
         and each of its designees or agents, as attorney-in-fact of such
         Grantor, irrevocably and with power of substitution, with authority to
         take any or all of the following actions upon the occurrence and during
         the continuance of an Event of Default:

                           (i) to demand, collect, settle, compromise and
                  adjust, and give discharges and releases concerning the
                  Collateral, all as the Collateral Agent may reasonably deem
                  appropriate;

                           (ii) to commence and prosecute any actions at any
                  court for the purposes of collecting any of the Collateral and
                  enforcing any other right in respect thereof;

                           (iii) to defend, settle or compromise any action
                  brought and, in connection therewith, give such discharge or
                  release as the Collateral Agent may reasonably deem
                  appropriate;

                           (iv) to receive, open and dispose of mail addressed
                  to a Grantor and endorse checks, notes, drafts, acceptances,
                  money orders, bills of lading, warehouse receipts or other
                  instruments or documents evidencing payment, shipment or
                  storage of the goods giving rise to the Collateral on behalf
                  of and in the name of such Grantor, or securing, or relating
                  to such Collateral;

                           (v) to pay or discharge taxes, liens, security
                  interests or other encumbrances levied or placed on or
                  threatened against the Collateral;

                           (vi) to direct any parties liable for any payment in
                  connection with any of the Collateral to make payment of any
                  and all monies due and to become due thereunder directly to
                  the Collateral Agent or as the Collateral Agent shall direct;

                           (vii) to receive payment of and receipt for any and
                  all monies, claims, and other amounts due and to become due at
                  any time in respect of or arising out of any Collateral;

                           (viii) to sell, assign, transfer, make any agreement
                  in respect of, or otherwise deal with or exercise rights in
                  respect of, any Collateral or the goods or services which have
                  given rise thereto, as fully and completely as though the
                  Collateral Agent were the absolute owner thereof for all
                  purposes;

                           (ix) to adjust and settle claims under any insurance
                  policy relating thereto;

                           (x) to execute and deliver all assignments,
                  conveyances, statements, financing statements, renewal
                  financing statements, security and pledge agreements,
                  affidavits, notices and other agreements, instruments and
                  documents that the Collateral Agent may reasonably deem
                  appropriate in order to perfect and maintain the security
                  interests and liens granted in this Security Agreement and in
                  order to fully consummate all of the transactions contemplated
                  therein;

                                       14
<PAGE>
                           (xi) to institute any foreclosure proceedings that
                  the Collateral Agent may reasonably deem appropriate; and

                           (xii) to do and perform all such other acts and
                  things as the Collateral Agent may reasonably deem appropriate
                  or convenient in connection with the Collateral.

                  This power of attorney is a power coupled with an interest and
         shall be irrevocable for so long as any of the Secured Obligations
         (other than any such obligations that, by their terms, survive
         termination of the Credit Documents) shall remain outstanding and until
         all of the commitments relating thereto shall have been terminated. The
         Collateral Agent shall be under no duty to exercise or withhold the
         exercise of any of the rights, powers, privileges and options expressly
         or implicitly granted to the Collateral Agent in this Security
         Agreement, and shall not be liable for any failure to do so or any
         delay in doing so. The Collateral Agent shall not be liable for any act
         or omission or for any error of judgment or any mistake of fact or law
         in its individual capacity or its capacity as attorney-in-fact except
         acts or omissions resulting from its gross negligence or willful
         misconduct. This power of attorney is conferred on the Collateral Agent
         solely to protect, preserve and realize upon its security interest in
         the Collateral.

                  (b) Performance by the Collateral Agent of Obligations. If any
         Grantor fails to perform any agreement or obligation contained herein,
         the Collateral Agent itself may perform, or cause performance of, such
         agreement or obligation, and the expenses of the Collateral Agent
         incurred in connection therewith shall be payable by the Grantors on a
         joint and several basis pursuant to Section 26 hereof.

                  (c) The Collateral Agent's Duty of Care. Other than the
         exercise of reasonable care to assure the safe custody of the
         Collateral while being held by the Collateral Agent hereunder, the
         Collateral Agent shall have no duty or liability to preserve rights
         pertaining thereto, it being understood and agreed that the Grantors
         shall be responsible for preservation of all rights in the Collateral,
         and the Collateral Agent shall be relieved of all responsibility for
         the Collateral upon surrendering it or tendering the surrender of it to
         the Grantors. The Collateral Agent shall be deemed to have exercised
         reasonable care in the custody and preservation of the Collateral in
         its possession if such Collateral is accorded treatment substantially
         equal to that which the Collateral Agent accords its own property,
         which shall be no less than the treatment employed by a reasonable and
         prudent agent in the industry, it being understood that the Collateral
         Agent shall not have responsibility for taking any necessary steps to
         preserve rights against any parties with respect to any of the
         Collateral. In the event of a public or private sale of Collateral
         pursuant to Section 8 hereof, the Collateral Agent shall have no
         obligation to clean, repair or otherwise prepare the Collateral for
         sale.

         11. Rights of Required Banks. All rights of the Collateral Agent
hereunder, if not exercised by the Collateral Agent, may be exercised by the
Required Banks.

         12. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Collateral
Agent or any of the holders of the Secured Obligations in cash or its
equivalent, will be applied in reduction of the Secured Obligations in the order
set forth in the Intercreditor Agreement or other document relating to the
Secured Obligations, and each Grantor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Collateral Agent shall have the continuing and exclusive right to apply and
reapply any and all such payments and proceeds in the Collateral Agent's sole
discretion, notwithstanding any entry to the contrary upon any of its books and
records.

                                       15
<PAGE>
         13. Costs of Counsel. At all times hereafter, the Grantors agree to
promptly pay upon demand any and all reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees) of the Collateral Agent and the
holders of the Secured Obligations (a) as required under the Credit Agreement
and (b) as necessary to protect the Collateral or to exercise any rights or
remedies under this Security Agreement or with respect to any of the Collateral.
All of the foregoing costs and expenses shall constitute Secured Obligations
hereunder.

         14. Continuing Agreement.

                  (a) This Security Agreement shall be a continuing agreement in
         every respect and shall remain in full force and effect so long as any
         of the Secured Obligations (other than any such obligations that, by
         their terms, survive termination of the Credit Documents) remains
         outstanding and until all of the commitments relating thereto have been
         terminated. Upon such payment and termination, this Security Agreement
         shall be automatically terminated and the Collateral Agent and the
         holders of the Secured Obligations shall, upon the request and at the
         expense of the Grantors, forthwith release all of its liens and
         security interests hereunder and shall execute and deliver all UCC
         termination statements and/or other documents reasonably requested by
         the Grantors evidencing such termination. Notwithstanding the
         foregoing, all releases and indemnities provided hereunder shall
         survive termination of this Security Agreement.

                  (b) This Security Agreement shall continue to be effective or
         be automatically reinstated, as the case may be, if at any time
         payment, in whole or in part, of any of the Secured Obligations is
         rescinded or must otherwise be restored or returned by the Collateral
         Agent or any holder of the Secured Obligations as a preference,
         fraudulent conveyance or otherwise under any bankruptcy, insolvency or
         similar law, all as though such payment had not been made; provided
         that in the event payment of all or any part of the Secured Obligations
         is rescinded or must be restored or returned, all reasonable costs and
         expenses (including, without limitation, reasonable attorneys' fees and
         disbursements) incurred by the Collateral Agent or any holder of the
         Secured Obligations in defending and enforcing such reinstatement shall
         be deemed to be included as a part of the Secured Obligations.

         15. Amendments and Waivers. This Security Agreement and the provisions
hereof may not be amended, waived, modified, changed, discharged or terminated
except as set forth in the Credit Agreement.

         16. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Grantor, its successors and assigns, and shall inure, together with the rights
and remedies of the Collateral Agent and the holders of the Secured Obligations
hereunder, to the benefit of the Collateral Agent and the holders of the Secured
Obligations and their successors and permitted assigns; provided, however, that
none of the Grantors may assign its rights or delegate its duties hereunder
without the prior written consent of the requisite Lenders under the Credit
Agreement. To the fullest extent permitted by law, each Grantor hereby releases
the Collateral Agent and each holder of the Secured Obligations, and their
respective successors and assigns and any party acting as attorney for the
Collateral Agent or the holders of the Secured Obligations, from any liability
for any act or omission or for any error of judgment or mistake of fact or law
relating to this Security Agreement or the Collateral, except for any liability
arising from the gross negligence or willful misconduct of the Collateral Agent
or such holder, or their respective officers, employees or agents.

         17. Notices. All notices required or permitted to be given under this
Security Agreement shall be given as provided in the Credit Agreement.

         18. Counterparts. This Security Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and

                                       16
<PAGE>
the same instrument. It shall not be necessary in making proof of this Security
Agreement to produce or account for more than one such counterpart.

         19. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.

         20. Governing Law; Submission to Jurisdiction; Venue.

                  (a) THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
         THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
         INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any
         legal action or proceeding with respect to this Security Agreement may
         be brought in the state or federal courts located in New York, New
         York, and, by execution and delivery of this Security Agreement, each
         Grantor hereby irrevocably accepts for itself and in respect of its
         property, generally and unconditionally, the jurisdiction of such
         courts. Each Grantor further irrevocably consents to the service of
         process out of any of the aforementioned courts in any such action or
         proceeding by the mailing of copies thereof by registered or certified
         mail, postage prepaid, to it at the address for notices pursuant to the
         Credit Agreement, such service to become effective three days after
         such mailing. Nothing herein shall affect the right of the Collateral
         Agent to serve process in any other manner permitted by law or to
         commence legal proceedings or to otherwise proceed against any Grantor
         in any other jurisdiction.

                  (b) Each Grantor hereby irrevocably waives 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 Security Agreement brought in the courts referred to in subsection
         (a) hereof 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.

         21. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE PARTIES TO THIS SECURITY AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

         22. Severability. If any provision of this Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.

         23. Entirety. This Security Agreement, the other Credit Documents and
the other documents relating to the Secured Obligations represent the entire
agreement of the parties hereto and thereto, and supersede all prior agreements
and understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Credit Documents, any other documents relating to
the Secured Obligations, or the transactions contemplated herein and therein.

         24. Survival. All representations and warranties of the Grantors
hereunder shall survive the execution and delivery of this Security Agreement,
the other Credit Documents and the other documents relating to the Secured
Obligations, the delivery of the Notes and the extension of credit thereunder or
in connection therewith.

                                       17
<PAGE>
         25. Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by a Grantor), or by a
guarantee, endorsement or property of any other Person, then the Collateral
Agent shall have the right to proceed against such other property, guarantee or
endorsement upon the occurrence of any Event of Default, and the Collateral
Agent shall have the right, in its sole discretion, to determine which rights,
security, liens, security interests or remedies the Collateral Agent shall at
any time pursue, relinquish, subordinate, modify or take with respect thereto,
without in any way modifying or affecting any of them or the Secured Obligations
or any of the rights of the Collateral Agent or the holders of the Secured
Obligations under this Security Agreement, under any of the other Credit
Documents or under any other document relating to the Secured Obligations.

         26. Joint and Several Obligations of Grantors.

                  (a) Subject to clause (c) of this Section 26, each of the
         Grantors is accepting joint and several liability hereunder in
         consideration of the financial accommodation to be provided by the
         holders of the Secured Obligations, for the mutual benefit, directly
         and indirectly, of each of the Grantors and in consideration of the
         undertakings of each of the Grantors to accept joint and several
         liability for the obligations of each of them.

                  (b) Subject to clause (c) of this Section 26, each of the
         Grantors jointly and severally hereby irrevocably and unconditionally
         accepts, not merely as a surety but also as a co-debtor, joint and
         several liability with the other Grantors with respect to the payment
         and performance of all of the Secured Obligations arising under this
         Security Agreement, the other Credit Documents and any other documents
         relating to the Secured Obligations, it being the intention of the
         parties hereto that all the Secured Obligations shall be the joint and
         several obligations of each of the Grantors without preferences or
         distinction among them.

                  (c) Notwithstanding any provision to the contrary contained
         herein, in any other of the Credit Documents or in any other documents
         relating to the Secured Obligations, the obligations of each Guarantor
         under the Credit Agreement and the other Credit Documents shall be
         limited to an aggregate amount equal to the largest amount that would
         not render such obligations subject to avoidance under Section 548 of
         the Bankruptcy Code or any comparable provisions of any applicable
         state law.

         27. Regulatory Approvals.

                  (a) Any provision contained herein to the contrary
         notwithstanding, except for the security interests expressly granted
         herein or therein or upon the exercise by the Collateral Agent or the
         Administrative Agent of rights and remedies in accordance herewith or
         therewith and pursuant to clause (b), below, upon the occurrence and
         continuation of an Event of Default, this Agreement, the Loan Documents
         and the transactions contemplated hereby and thereby (i) do not and
         will not constitute, create, or have the effect of constituting or
         creating, directly or indirectly, actual or practical ownership of any
         Loan Parties by the holders of the Secured Obligations, or control,
         affirmative or negative, direct or indirect, by the holders of the
         Secured Obligations over the management or any other aspect of the
         operation of any Loan Party, which ownership and control remain
         exclusively and at all times in such Loan Party or Loral, as the case
         may be, and (ii) do not and will not constitute the transfer,
         assignment, or disposition in any manner, voluntarily or involuntarily,
         directly or indirectly, of any license, permit, certificate or
         authorization at any time issued to any Loan Party by the Federal
         Communications Commission (the "FCC"), any other federal, state or
         local regulatory or governmental bodies applicable to or having
         jurisdiction over the Grantor or any Governmental Authority, or the
         transfer of control of any such Loan Party within the meaning of the
         Federal Communications Act of 1934, as

                                       18
<PAGE>
         amended, and the respective rules and regulations thereunder and
         thereof, any other federal or state laws, rules and regulations of
         other operating municipality regulatory or governmental bodies
         applicable to or having jurisdiction over the Grantor as well as
         pursuant to the terms of any franchise, license or similar operating
         right held by the Grantor.

                  (b) Any provision contained herein to the contrary
         notwithstanding, no action, including any foreclosure on, sale,
         transfer or other disposition of, or the exercise of any right to vote
         or consent, shall be taken hereunder by the Collateral Agent with
         respect to any items of the Collateral unless and until all applicable
         requirements (if any) of the FCC under the Federal Communications Act
         of 1934, as amended, and the respective rules and regulations
         thereunder and thereof, as well as any other federal or state laws,
         rules and regulations of other operating municipality regulatory or
         governmental bodies applicable to or having jurisdiction over the
         Grantor, have been satisfied with respect to such action and there have
         been obtained such consents, approvals and authorizations (if any) as
         may be required to be obtained from the FCC, any operating municipality
         and any other Governmental Authority under the terms of any franchise,
         license or similar operating right held by the Grantor. It is the
         intention of the parties hereto that the Liens in favor of the
         Collateral Agent on the Collateral shall in all relevant aspects be
         subject to and governed by said statutes, rules and regulations as well
         as the terms of any franchise, license or similar operating right held
         by the Grantor and that nothing in this Agreement shall be construed to
         diminish the control exercised by the Grantor except in accordance with
         the provisions of such statutory requirements and rules and regulations
         as well as the terms of any franchise, license or similar operating
         right held by the Grantor and the obtaining in advance of any necessary
         consents, approvals or authorizations pursuant thereto. The Grantor
         agrees that upon request by the Collateral Agent from time to time
         after the occurrence and during the continuance of an Event of Default
         it will use its reasonable best efforts to obtain any governmental,
         regulatory or third party consents, approvals or authorizations
         referred to in this Section 27.

         28. Limitation. Notwithstanding anything herein to the contrary, the
obligations of the Grantors hereunder in respect of the Satellite Indebtedness
shall be limited to the Collateral hereunder.

                  [remainder of page intentionally left blank]

                                       19
<PAGE>
         Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.

GRANTORS:                    LORAL SPACECOM CORPORATION,
                             a Delaware corporation

                             By:      /s/  Richard Mastoloni
                                -----------------------------------------
                             Name: Richard Mastoloni
                             Title: Vice President

                             SPACE SYSTEMS/LORAL, INC.,
                             a Delaware corporation

                             By:      /s/  Richard Mastoloni
                                -----------------------------------------
                             Name: Richard Mastoloni
                             Title: Vice President

                             LORAL COMMUNICATIONS SERVICES, INC.,
                             a Delaware corporation

                             By:      /s/  Richard Mastoloni
                                -----------------------------------------
                             Name: Richard Mastoloni
                             Title: Vice President

                             LORAL GROUND SERVICES, L.L.C.,
                             a Delaware limited liability company

                             By:      /s/  Richard Mastoloni
                                -----------------------------------------
                             Name: Richard Mastoloni
                             Title: Vice President

                                                      LORAL SPACECOM CORPORATION
                                                              SECURITY AGREEMENT
<PAGE>
Accepted and agreed to as of the date first above written.

BANK OF AMERICA, N.A.,
as Collateral Agent

By:      /s/  Steve A. Aronowitz
   -----------------------------------------
Name:    Steve A. Aronowitz
Title:   Managing Director

                                                      LORAL SPACECOM CORPORATION
                                                              SECURITY AGREEMENT

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