-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L4NqN9uDGKsQipW5+q96vwCoNlDFNw2gDmt7l0TjJrZLi+P32uslmq2GrTJAkpXR k4QmQdl6Hn0iqpL+Ah8l0w== 0000944209-00-000349.txt : 20000313 0000944209-00-000349.hdr.sgml : 20000313 ACCESSION NUMBER: 0000944209-00-000349 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000310 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUGHES ELECTRONICS CORP CENTRAL INDEX KEY: 0000944868 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 521106564 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-26035 FILM NUMBER: 566955 BUSINESS ADDRESS: STREET 1: 200 N SEPULVEDA BLVD CITY: EL SAGUNDO STATE: CA ZIP: 90245-0956 BUSINESS PHONE: 3106629688 MAIL ADDRESS: STREET 1: 200 N SEPULVEDA BOULEVARD CITY: EL SAGUNDO STATE: CA ZIP: 90245-0956 10-K405 1 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549-1004 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES --- EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 OR --- TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _____________ Commission file number 0-26035 HUGHES ELECTRONICS CORPORATION ------------------------------ (Exact name of registrant as specified in its charter) STATE OF DELAWARE 52-1106564 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
200 North Sepulveda Boulevard El Segundo, California 90245 (310) 662-9688 (Address, including zip code, and telephone number, including area code, of registrants' principal executive office) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common stock, par value $1.00 per share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . ---- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X) As of December 31, 1999, there were outstanding 1,000 shares of the issuer's $1.00 par value common stock. The registrant has met the conditions set forth in General Instructions I(1)(a) and (b) of Form 10-K and is therefore filing this Annual Report on Form 10-K with the reduced disclosure format. HUGHES ELECTRONICS CORPORATION PART I ITEM 1. Business General Hughes Electronics Corporation ("Hughes") (the "Company") (the "Registrant") is a wholly-owned subsidiary of General Motors Corporation. General Motors primarily engages in the automotive and satellite and wireless communications industries. General Motors also has financing and insurance operations and, to a lesser extent, engages in other industries. Hughes has been a pioneer in many aspects of the satellite and wireless communications industry, and its technologies have driven the creation of new services and markets and have established Hughes as a leader in each of the markets it serves. Hughes believes that its ability to identify, define and develop new markets early has provided it with a significant competitive advantage in building sustainable market leadership positions. In January 2000, Hughes announced a strategy designed to accelerate the growth of its services businesses. In connection with this new focus on its services businesses, Hughes recently entered into an agreement to sell its satellite systems manufacturing businesses to The Boeing Company ("Boeing") for $3.75 billion in cash. In addition, Hughes has realigned its marketing efforts to focus on its two major customer groups: consumers and business enterprises. Hughes believes this marketing realignment will enable it to obtain the full benefit of the synergies between its various business units and more effectively reach its customers. Hughes provides advanced communications services on a global basis. Hughes has developed a range of entertainment, information and communications services for the home and business markets, including video, data, voice, multimedia and Internet services. Hughes believes that these services provide the potential for higher value through higher margins and higher growth than Hughes' traditional manufacturing businesses. For the years ended December 31, 1999 and 1998, multi- channel entertainment services, satellite transponder leasing and other services revenues represented about $4.6 billion, or about 82%, of Hughes' total revenues and about $2.6 billion, or about 76%, of Hughes' total revenues, respectively. This represents about 72% year-over-year growth in service revenues. These figures exclude revenues attributable to Hughes' satellite systems manufacturing businesses. Hughes' businesses include: . DIRECTV, the world's leading digital multi-channel entertainment service, based on the number of subscribers. DIRECTV includes businesses in the United States and Latin America, and constitutes Hughes' Direct-to-Home Broadcast segment. In 1999, DIRECTV gained a record 1.6 million net new high power subscribers in the United States, representing a 39% growth rate over 1998. As of December 31, 1999, DIRECTV U.S. had over 8 million subscribers and average monthly revenue per high power subscriber of $58, the highest in the U.S. multi-channel entertainment industry. Record subscriber growth was also achieved in the Latin America DIRECTV businesses where total subscribers grew to 804,000 in 1999 from 484,000 in 1998, a 66% increase. Average monthly revenue per subscriber for the Latin America DIRECTV businesses was $36 at December 31, 1999. . PanAmSat, the owner and operator of the largest commercial satellite fleet in the world. PanAmSat, a publicly-held company of which Hughes owns 81%, constitutes Hughes' Satellite Services segment. PanAmSat owns and operates 20 satellites that are capable of transmitting signals to geographic areas covering a substantial portion of the world's population. PanAmSat provides satellite capacity for the transmission of cable and broadcast television programming from the content source to the consumer distribution point (the consumer's home or cable operator). PanAmSat satellites have the capability to reach over 125 million cable households around the world and serve as transmission platforms for 6 direct-to-home services worldwide. In addition, PanAmSat provides satellite services to telecommunications carriers, corporations and Internet service providers for the provision of satellite- based communications networks, including private corporate networks employing very small aperture terminals and international access to the U.S. Internet backbone. . Broadband Services and Products, which includes Hughes Network Systems, a leading provider of satellite and wireless communications ground equipment and business communications services. Hughes Network Systems has more than a 50% share of the global market for very small aperture terminals or `` VSAT'' private business networks. Hughes Network Systems is also one of the two largest manufacturers of DIRECTV subscriber equipment having shipped over 2.1 million units in 1999. Hughes Network Systems is also leading the development of Spaceway, a satellite-based broadband communications platform that is expected to provide customers with high-speed, two-way data communications on a more cost-efficient basis than systems that are currently available. Spaceway is expected to launch service in North America in 2003 and currently is not a separately reported business segment. I-1 HUGHES ELECTRONICS CORPORATION In addition, Hughes' business currently includes its satellite systems manufacturing businesses. Hughes Space and Communications, the largest component of Hughes' satellite systems manufacturing businesses, is the principal component of the discontinued operations caption in Hughes' financial statements because Hughes has agreed to sell Hughes Space and Communications and its related satellite systems manufacturing assets to Boeing. See Note 17 of the Notes to Financial Statements in Part II for further discussion. Segment Reporting Data Operating segment and principal geographic area data for 1999, 1998 and 1997 are summarized in Note 19 of the Notes to Financial Statements in Part II. * * * * * * * The Registrant makes no attempt herein to predict the future trend of its business and earnings or the effect thereon of the results of changes in general economic, industrial, regulatory, and international conditions. ITEM 2. Properties As of December 31, 1999, the Company, excluding its discontinued operations, had approximately 54 locations operating in 17 states and 43 cities in the United States and approximately 29 additional locations in 12 cities in approximately 11 countries outside the United States. At such date, Hughes owned approximately 1.3 million square feet of space and leased an additional 1.4 million square feet of space. ITEM 3. Legal Proceedings (a) Material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company became, or was, a party during the year ended December 31, 1999 or subsequent thereto, but before the filing of this report are summarized below: In connection with the 1997 spin-off of the defense electronics business of Hughes' predecessor as part of the Hughes restructuring transactions and the subsequent merger of that business with Raytheon Company, the terms of the merger agreement provided processes for resolving disputes that might arise in connection with post-closing financial adjustments that were also called for by the terms of the merger agreement. These financial adjustments might require a cash payment from Raytheon to Hughes or vice versa. A dispute currently exists regarding the post-closing adjustments which Hughes and Raytheon have proposed to one another and related issues regarding the adequacy of disclosures made by Hughes to Raytheon in the period prior to consummation of the merger. Hughes and Raytheon are proceeding with the dispute resolution process. It is possible that the ultimate resolution of the post- closing financial adjustment and of related disclosure issues may result in Hughes making a payment to Raytheon that would be material to Hughes. However, the amount of any payment that either party might be required to make to the other cannot be determined at this time. Hughes intends to vigorously pursue resolution of the disputes through the arbitration processes, opposing the adjustments proposed by Raytheon, and seeking the payment from Raytheon that Hughes has proposed. *** I-2 HUGHES ELECTRONICS CORPORATION On June 3, 1999, the National Rural Telecommunications Cooperative ("NRTC") filed a lawsuit against DIRECTV, Inc. and Hughes Communications Galaxy, Inc., which Hughes refers to together in this description as ``DIRECTV'', in the U.S. District Court for the Central District of California, alleging that DIRECTV has breached the DBS Distribution Agreement with the NRTC. The DBS Distribution Agreement provides the NRTC with certain rights, in certain specified portions of the United States, with respect to DIRECTV programming delivered over 27 of the 32 frequencies at the 101 (degrees) west longitude orbital location. The NRTC claims that DIRECTV has wrongfully deprived it of the exclusive right to distribute programming formerly provided by U.S. Satellite Broadcasting Company , Inc. ("USSB") over the other five frequencies at 101 (degrees). DIRECTV denies that the NRTC is entitled to exclusive distribution rights to the former USSB programming because, among other things, the NRTC's exclusive distribution rights are limited to programming distributed over 27 of the 32 frequencies at 101 (degrees). The NRTC's complaint seeks, in the alternative, the right to distribute former USSB programming on a non-exclusive basis and the recovery of related revenues from the date USSB was acquired by Hughes. DIRECTV maintains that the NRTC's right under the DBS Distribution Agreement is to market and sell the former USSB programming as its agent and the NRTC is not entitled to the claimed revenues. DIRECTV intends to vigorously defend against the NRTC claims. DIRECTV has also filed a counterclaim against the NRTC seeking a declaration of the parties' rights under the DBS Distribution Agreement. On August 26, 1999, the NRTC filed a second lawsuit against DIRECTV alleging that DIRECTV has breached the DBS Distribution Agreement. In this lawsuit, the NRTC is asking the court to require DIRECTV to pay the NRTC a proportionate share of unspecified financial benefits that DIRECTV derives from programming providers and other third parties. DIRECTV denies that it owes any sums to the NRTC on account of the allegations in these matters and plans to vigorously defend itself against these claims. *** Pegasus Satellite Television, Inc. and Golden Sky Systems, Inc., the two largest NRTC affiliates, filed an action on January 11, 2000 against DIRECTV in the U.S. District Court in Los Angeles. The plaintiffs allege, among other things, that DIRECTV has interfered with their contractual relationship with the NRTC. The plaintiffs plead that their rights and damages are derivative of the rights and claims asserted by the NRTC in its two cases against DIRECTV. The plaintiffs also allege that DIRECTV has interfered with their contractual relationships with manufacturers and distributors by preventing those parties from selling receiving equipment to the plaintiffs' dealers. DIRECTV denies that it has wrongfully interfered with any of the plaintiffs' business relationships and will vigorously defend the lawsuit. *** EchoStar Communications Corporation and others commenced an action in the U.S. District Court in Colorado on February 1, 2000 against DIRECTV, Hughes Network Systems and Thomson Consumer Electronics, Inc. seeking, among other things, injunctive relief and unspecified damages, including treble damages, in connection with allegations that the defendants have entered into agreements with retailers and program providers and engaged in other conduct that violates the antitrust laws and constitutes unfair competition. DIRECTV believes that the complaint is without merit and intends to vigorously defend against the allegations raised. *** General Electric Capital Corporation ("GECC") and DIRECTV, Inc. entered into a contract on July 31, 1995, in which GECC agreed to establish and manage a private label consumer credit program for consumer purchases of hardware and related DIRECTV programming. Under the contract, GECC also agreed to provide certain related services to DIRECTV, including credit risk scoring, billing and collections services. DIRECTV agreed to act as a surety for loans complying with the terms of the contract. Hughes guaranteed DIRECTV's performance under the contract. A complaint and counterclaim have been filed by the parties in the U.S. District Court for the District of Connecticut concerning GECC's performance and DIRECTV's obligation to act as a surety. GECC claims damages from DIRECTV in excess of $140 million. DIRECTV is seeking damages from GECC in excess of $45 million. Hughes intends to vigorously contest GECC's allegations and pursue Hughes' own contractual rights and remedies. Pretrial discovery is completed. No specific trial date has been set, but a trial may be held in 2000. *** I-3 HUGHES ELECTRONICS CORPORATION There is a pending grand jury investigation into whether Hughes should be accused of criminal violations of the export control laws arising out of the participation of two of its employees on a committee formed to review the findings of Chinese engineers regarding the failure of a Long March rocket in China in 1996. Hughes is also subject to the authority of the State Department to impose sanctions for non-criminal violations of the Arms Export Control Act. The possible criminal and/or civil sanctions could include fines as well as debarment from various export privileges and participating in government contracts. If Hughes were to enter into a settlement of this matter prior to the closing of the Boeing transaction that involves a debarment from sales to the U.S. government or a material suspension of Hughes' export licenses or other material limitation on projected business activities of the satellite systems manufacturing businesses, Boeing would not be obligated to complete the purchase of Hughes' satellite systems manufacturing businesses. Hughes does not expect the grand jury investigation or State Department review to result in a material adverse effect upon its businesses. However, there can be no assurance as to such a favorable outcome. *** In November 1996, Personalized Media Communications, Inc. ("PMC") brought an International Trade Commission proceeding against DIRECTV, USSB, Hughes Network Systems and other manufacturers of receivers for the DIRECTV system to prevent importation of certain receivers manufactured in Mexico, alleging infringement of one of its patents. During 1997, the International Trade Commission held for DIRECTV and other respondents on all claims at issue, finding each to be invalid. PMC appealed these adverse rulings to the Court of Appeals for the Federal Circuit. During 1998, the Court of Appeals affirmed the lower court's holdings as to three of the claims, and remanded to the International Trade Commission for further deliberation on a remaining claim. PMC then moved for dismissal of the proceeding, which was granted, terminating the action. Also in 1996, PMC filed a related action in the U.S. District Court for the Northern District of California. This case has been stayed pending outcome of the International Trade Commission proceeding. The complaint alleges infringement and willful infringement of three PMC patents, and seeks unspecified damages, trebling of damages, an injunction and attorneys' fees. Hughes denies that it engaged in acts of infringement of the asserted patents and intends to vigorously contest these claims. *** In October 1994, a California jury awarded a total of approximately $90 million in damages against Hughes, which include approximately $10 million of actual damages and punitive damages of $40 million to each of two former Hughes employees, Lane (race discrimination/retaliation) and Villalpando (retaliation), based on claims of mistreatment and denials of promotions. The trial court granted Hughes' motion to set aside the verdicts because of insufficient evidence and ordered a new trial of the matter. On January 6, 1997, the Court of Appeal reversed the trial court's decision that had set aside the verdicts and ordered a new trial. The Court of Appeal also reinstated the jury verdicts, while reducing the two $40 million punitive damage awards to $5 million and approximately $3 million, resulting in an aggregate judgment of approximately $17 million. Hughes' petition for review by the California Supreme Court was granted in November 1997. On March 6, 2000, the California Supreme Court reversed the judgment of the Court of Appeal, remanding the case with instructions to set aside the verdicts as to actual and punitive damages and affirming the order of the trial court to proceed with a new trial. *** Hughes is subject to the requirements of federal, state, local and foreign environmental and occupational safety and health laws and regulations. These include laws regulating air emissions, water discharge and waste management. Hughes has an environmental management structure designed to facilitate and support its compliance with these requirements. Hughes cannot provide assurance, however, that Hughes is at all times in complete compliance with all such requirements. Although Hughes has made and will continue to make capital and other expenditures to comply with environmental requirements, Hughes does not expect capital or other expenditures for environmental compliance to be material in 2000 and 2001. Environmental requirements are complex, change frequently and have become more stringent over time. Accordingly, Hughes cannot provide assurance that these requirements will not change or become more stringent in the future in a manner that could have a material adverse effect on Hughes' business. I-4 HUGHES ELECTRONICS CORPORATION Hughes is also subject to environmental laws requiring the investigation and cleanup of environmental contamination at facilities it formerly owned or operated or currently owns or operates or to which it sent hazardous wastes for treatment or disposal. Hughes is aware of contamination at certain of its sites. In addition, Hughes has been named as a potentially responsible party at several Superfund sites. Although Hughes believes its reserve is adequate to cover environmental investigation and cleanup, Hughes cannot provide assurance that Hughes' environmental cleanup costs and liabilities will not exceed the current amount of its reserve. *** I-5 HUGHES ELECTRONICS CORPORATION PART II ITEM 4. Submission of Matters to a Vote of Security Holders None. ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters All of the Company's common stock and preferred stock are owned by General Motors. Accordingly, there is no public trading market for Hughes' common or preferred equity. Dividends on the common stock will be paid when and if declared by General Motors' Board of Directors. At present, the Company has no plans to pay a dividend on the common stock. Dividends on the preferred stock are payable to General Motors at an annual rate of 6.25%. None of Hughes' common and preferred stock is subject to outstanding options or warrants to purchase common or preferred stock. There are no securities convertible into Hughes' common or preferred stock. None of the Company's common and preferred stock currently can be sold under Rule 144. The Company is not currently publicly offering any of its common and preferred stock. See Notes 15 and 16 of the Notes to Financial Statements in Part II for further discussion. II-1 HUGHES ELECTRONICS CORPORATION ITEM 6. Selected Financial Data
Years Ended December 31, ------------------------------------------------------------ 1999 1998 1997 1996 1995 ---------- ---------- ---------- --------- --------- (Dollars in Millions) Statement of Operations Data: Total revenues $ 5,560.3 $ 3,480.6 $ 2,838.3 $2,058.3 $1,554.0 Total operating costs and expenses 5,988.3 3,526.8 2,794.8 2,109.2 1,573.6 --------- --------- --------- -------- -------- Operating profit (loss) $ (428.0) $ (46.2) $ 43.5 $ (50.9) $ (19.6) ========= ========= ========= ======== ======== Income (loss) from continuing operations before extraordinary item and cumulative effect of accounting change $ (391.1) $ 63.5 $ 236.9 $ 13.1 $ (29.9) Income from discontinued operations, net of taxes 99.8 196.4 170.6 149.4 36.1 Gain on sale of discontinued operations, net of taxes - - 62.8 - - Extraordinary item, net of taxes - - (20.6) - - Cumulative effect of accounting change, net of taxes - (9.2) - - - --------- --------- --------- -------- -------- Net income (loss) (291.3) 250.7 449.7 162.5 6.2 Adjustments to exclude the effect of GM purchase accounting adjustments 21.0 21.0 21.0 21.0 21.0 Preferred stock dividends (50.9) - - - - --------- --------- --------- -------- -------- Earnings (Loss) Used for Computation of Available Separate Consolidated Net Income (Loss) $ (321.2) $ 271.7 $ 470.7 $ 183.5 $ 27.2 ========= ========= ========= ======== ======== Balance Sheet Data: Cash and cash equivalents $ 238.2 $ 1,342.0 $ 2,783.7 $ 6.2 $ 6.9 Total current assets 3,858.0 4,075.2 5,179.1 1,658.4 1,619.8 Total assets 18,597.0 12,617.4 12,141.5 3,861.3 3,512.7 Total current liabilities 2,642.1 1,346.0 1,007.4 691.9 477.9 Long-term debt 1,586.0 778.7 637.6 - - Minority interests 544.3 481.7 607.8 12.3 - Owner's equity 11,681.3 8,412.2 8,340.2 2,491.6 2,608.9 Other Data: EBITDA(1) $ 222.7 $ 341.7 $ 303.8 $ 112.6 $ 130.0 Depreciation and amortization 650.7 387.9 260.3 163.5 149.6 Capital expenditures 1,665.3 1,328.8 712.7 361.6 389.1 - ------- (1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the sum of operating profit (loss) and depreciation and amortization.
II-2 HUGHES ELECTRONICS CORPORATION ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations CONDENSED STATEMENT OF OPERATIONS
Years Ended December 31, --------------------------------- 1999 1998 1997 --------- --------- --------- (Dollars in Millions) Statement of Operations Data: Total revenues $5,560.3 $3,480.6 $2,838.3 Total operating costs and expenses 5,988.3 3,526.8 2,794.8 -------- -------- -------- Operating profit (loss) (428.0) (46.2) 43.5 Other income (expense), net (232.0) (57.0) 330.6 Income tax provision (benefit) (236.9) (142.3) 162.0 Minority interests in net losses of subsidiaries 32.0 24.4 24.8 -------- -------- -------- Income (loss) from continuing operations before extraordinary item and cumulative effect of accounting change (391.1) 63.5 236.9 Income from discontinued operations, net of taxes 99.8 196.4 170.6 Gain on sale of discontinued operations, net of taxes - - 62.8 Extraordinary item, net of taxes - - (20.6) Cumulative effect of account change, net of taxes - (9.2) - -------- -------- -------- Net income (loss) (291.3) 250.7 449.7 Adjustments to exclude the effect of GM purchase accounting adjustments 21.0 21.0 21.0 Preferred stock dividends (50.9) - - -------- -------- -------- Earnings (Loss) Used for Computation of Available Separate Consolidated Net Income (Loss) $ (321.2) $ 271.7 $ 470.7 ======== ======== ========
HUGHES ELECTRONICS CORPORATION SELECTED SEGMENT DATA
Years Ended December 31, ------------------------------------ 1999 1998 1997 ---------- ---------- ---------- (Dollars in Millions) Direct-To-Home Broadcast Total Revenues $ 3,785.0 $ 1,816.1 $ 1,276.9 Operating Loss (292.1) (228.1) (254.6) EBITDA (1) 19.9 (125.8) (168.5) EBITDA Margin (1) 0.5% N/A N/A Depreciation and Amortization $ 312.0 $ 102.3 $ 86.1 Segment Assets 9,056.6 2,190.4 1,408.7 Capital Expenditures (2) 516.9 230.8 105.6 Satellite Services Total Revenues $ 810.6 $ 767.3 $ 629.9 Operating Profit 338.3 318.3 292.9 Operating Profit Margin 41.7% 41.5% 46.5% EBITDA (1) $ 618.8 $ 553.3 $ 438.1 EBITDA Margin (1) 76.3% 72.1% 69.6% Depreciation and Amortization $ 280.5 $ 235.0 $ 145.2 Segment Assets 5,984.7 5,890.5 5,682.4 Capital Expenditures (3) 956.4 921.7 625.7 Network Systems Total Revenues $ 1,384.7 $ 1,076.7 $ 1,011.3 Operating Profit (Loss) (227.3) 10.9 74.1 Operating Profit Margin N/A 1.0% 7.3% EBITDA (1) $ (178.1) $ 52.6 $ 106.1 EBITDA Margin (1) N/A 4.9% 10.5% Depreciation and Amortization $ 49.2 $ 41.7 $ 32.0 Segment Assets 1,167.3 1,299.0 1,215.6 Capital Expenditures 35.0 40.0 43.1 Eliminations and Other Total Revenues $ (420.0) $ (179.5) $ (79.8) Operating Loss (246.9) (147.3) (68.9) EBITDA (1) (237.9) (138.4) (71.9) Depreciation and Amortization 9.0 8.9 (3.0) Segment Assets 2,388.4 3,237.5 3,834.8 Capital Expenditures 157.0 136.3 (61.7) Total Total Revenues $ 5,560.3 $ 3,480.6 $ 2,838.3 Operating Profit (Loss) (428.0) (46.2) 43.5 EBITDA (1) 222.7 341.7 303.8 EBITDA Margin (1) 4.0% 9.8% 10.7% Depreciation and Amortization $ 650.7 $ 387.9 $ 260.3 Total Assets 18,597.0 12,617.4 12,141.5 Capital Expenditures 1,665.3 1,328.8 712.7
Certain prior period amounts have been reclassified to conform with the 1999 classifications. (1) EBITDA (Earnings (Loss) Before Interest, Taxes, Depreciation and Amortization) is the sum of operating profit (loss) and depreciation and amortization. EBITDA margin is calculated by dividing EBITDA by total revenues. (2) Includes expenditures related to satellites amounting to $136.0 million in 1999 and $70.2 million in 1998. (3) Includes expenditures related to satellites amounting to $532.8 million, $726.3 million and $606.1 million, respectively. Also included in the 1999 and 1998 amounts are $369.5 million and $155.5 million, respectively, related to the early buy-out of satellite sale-leasebacks. This Annual Report may contain certain statements that Hughes believes are, or may be considered to be, "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by use of statements that include phrases such as we "believe," "expect," "anticipate," "intend," "plan," "foresee" or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. All of these forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those contemplated by the relevant forward-looking statement. The principal important risk factors which could cause actual performance and future actions to differ materially from forward-looking statements made herein include economic conditions, product demand and market acceptance, government action, local political or economic developments in or affecting countries where Hughes has operations, ability to obtain export licenses, competition, ability to achieve cost reductions, technological risk, limitations on access to distribution channels, the success and timeliness of satellite launches, in-orbit performance of satellites, ability of customers to obtain financing and Hughes' ability to access capital to maintain its financial flexibility. Additionally, Hughes and its 81% owned subsidiary, PanAmSat Corporation ("PanAmSat"), have experienced satellite anomalies in the past and may experience satellite anomalies in the future that could lead to the loss or reduced capacity of such satellites that could materially affect Hughes' operations. Readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-looking statements included in this Annual Report are made only as of the date of this Annual Report and we undertake no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances. General Business Overview The continuing operations of Hughes are comprised of the following segments: Direct-To-Home Broadcast, Satellite Services and Network Systems. The discontinued operations of Hughes consist of its satellite systems manufacturing businesses, which in January 2000, Hughes agreed to sell to The Boeing Company. Also included in discontinued operations for 1997 is the Avicom in-flight entertainment business, which was sold to Rockwell Collins, Inc. in December 1997. These transactions are discussed more fully below in "Liquidity and Capital Resources - Acquisitions, Investments and Divestitures." Hughes' financial information does not include the business of Delco Electronics Corporation ("Delco") or Hughes' defense electronics business. These businesses were divested as part of Hughes' recapitalization in December 1997, as more fully discussed in Note 1 to the financial statements. The Direct-To-Home Broadcast segment consists primarily of the United States and Latin America DIRECTV businesses, which provide digital multi-channel entertainment. The DIRECTV U.S. operations grew significantly during 1999 with Hughes' acquisition of the 2.3 million subscriber direct broadcast satellite medium-power business of PRIMESTAR in April 1999 and Hughes' acquisition of United States Satellite Broadcasting ("USSB"), a provider of premium subscription programming services, in May 1999. DIRECTV intends to continue to operate the medium-power PRIMESTAR business, PRIMESTAR by DIRECTV, through the end of 2000. During such time, the medium-power subscribers will continue to be offered the opportunity to transition to the high-power DIRECTV service. The USSB acquisition provided DIRECTV with 25 channels of video programming, including premium networks such as HBO, Showtime, Cinemax and The Movie Channel, which are now being offered to DIRECTV's subscribers. The results of operations for PRIMESTAR and USSB have been included in Hughes' financial information since their dates of acquisition. See Note 17 to the financial statements and "Liquidity and Capital Resources - Acquisitions, Investments and Divestitures," below, for further discussion of these transactions. In addition, DIRECTV U.S. launched local broadcast network services in the fourth quarter of 1999. Currently, DIRECTV is providing major local broadcast networks to 23 U.S. markets and plans to increase these markets to at least 25 in the first half of 2000. DIRECTV U.S. also launched foreign language programming in seven U.S. cities through its DIRECTV Para Todos /TM/ service, which currently provides programming packages with up to 21 Spanish special interest channels combined with up to 77 English channels. DIRECTV expects to expand the DIRECTV Para Todos service nationwide in the first half of 2000 and to expand its programming in other languages. The launch of these services did not materially affect revenues in 1999, but is expected to result in increased revenues in 2000 and thereafter. The Latin America DIRECTV businesses are comprised of Galaxy Latin America, LLC ("GLA"), Hughes' 78% owned subsidiary that provides DIRECTV services to 27 countries in Latin America and the Caribbean Basin; SurFin Ltd. ("SurFin"), a company 75% owned by Hughes, that provides financing of subscriber receiver equipment to certain GLA operating companies; Grupo Galaxy Mexicana, S.R.L. de C.V. ("GGM"), the exclusive distributor of DIRECTV in Mexico which was acquired in February 1999; and Galaxy Brasil, Ltda. ("GLB"), the exclusive distributor of DIRECTV in Brazil, which was acquired in July II-3 HUGHES ELECTRONICS CORPORATION 1999. The results of operations for SurFin, GGM, and GLB have been included in Hughes' financial information since their dates of acquisition. See Note 17 to the financial statements and "Liquidity and Capital Resources - Acquisitions, Investments and Divestitures," below, for further discussion of these transactions. Also included as part of the non-operating results of the Direct-To-Home Broadcast segment is DIRECTV Japan, a company 42.2% owned by Hughes that provides DIRECTV services in Japan. On March 1, 2000, Hughes announced that DIRECTV Japan's operations would be discontinued and that its subscribers would migrate to SkyPerfecTV, a company in Japan providing direct-to-home satellite broadcasting. In connection with this transaction, Hughes will receive an ownership interest in SkyPerfecTV. See "Liquidity and Capital Resources- Acquisitions, Investments and Divestitures," below, for further discussion. In June 1999, Hughes announced a new strategic alliance with AOL to develop and market digital entertainment and Internet services nationwide. This alliance is expected to accelerate subscriber growth and revenue per subscriber for DIRECTV, DirecPC(R) and eventually the new broadband services to be delivered via Spaceway(TM). As part of this alliance, Hughes and AOL plan to introduce two new enhanced TV and Internet-based interactive services in 2000. The first is a combination television receiver that will allow the consumer not only to receive DIRECTV's extensive programming, but also to access "AOL TV," a new service that will bring AOL's extensive interactive and Internet content to the consumer's television. The second is a high-speed Internet service called "AOL Plus via DirecPC" that will be delivered using Hughes Network Systems' DirecPC satellite network. Additionally, Hughes and AOL also plan to jointly develop new services and content for DIRECTV. The Satellite Services segment consists of PanAmSat, Hughes' 81% owned subsidiary. PanAmSat provides satellite services to its customers primarily through long-term operating lease contracts for the full or partial use of satellite transponder capacity. In May 1997, Hughes and PanAmSat Corporation merged their respective satellite service operations into a new publicly-held company, which retained the name PanAmSat Corporation. As a result of this merger, Hughes obtained a 71.5% ownership interest in PanAmSat. Since the date of the merger, Hughes has included PanAmSat's results of operations in its financial information. In May 1998, Hughes purchased an additional 9.5% interest in PanAmSat, increasing Hughes' ownership to 81%. See Note 17 to the financial statements and the "Liquidity and Capital Resources - Acquisitions, Investments and Divestitures" section, below, for further discussion of these transactions. The Network Systems segment consists of Hughes Network Systems ("HNS"), a manufacturer of DIRECTV receiver equipment and provider of satellite and wireless communications ground equipment and business communications services. In December 1999, HNS recorded a pre-tax non-operating gain of approximately $39.4 million resulting from the sale of securities of its 56.1% owned subsidiary, Hughes Software Systems Private Limited ("HSS"), in conjunction with HSS' initial public offering in India. In January 2000, Hughes announced the discontinuation of its mobile cellular and narrowband local loop product lines at HNS. As a result of this decision, HNS recorded a fourth quarter 1999 pre-tax charge to continuing operations of $272.1 million. The charge represents the write-off of receivables and inventories, licenses, software and equipment with no alternative use. The Network Systems segment was also affected in February 1999 by a notification received by Hughes from the Department of Commerce that it intended to deny a U.S. government export license that Hughes was required to obtain in connection with its contract with Asia-Pacific Mobile Telecommunications Satellite Pte. Ltd. ("APMT") for the provision of a satellite-based mobile telecommunications system. As a result, APMT and Hughes terminated the contract on April 9, 1999, resulting in a pre-tax charge to Hughes' earnings of $92.0 million in the first quarter of 1999. Of the $92.0 million charge, $11.0 million was attributable to the Network Systems segment and the remainder to Hughes Space and Communications which is included in discontinued operations. The charge represented the write-off of receivables and inventory, with no alternative use, related to the contract. Satellite Fleet At December 31, 1999, Hughes had a fleet of 25 satellites, five owned by DIRECTV and 20 owned and operated by PanAmSat. The satellite fleet was expanded in the fourth quarter of 1999 with the launch of DTV-1R and Galaxy-XI. DTV-1R was placed into service at DIRECTV's 101 degree west longitude orbital slot and an existing satellite, DBS-1, was moved to DIRECTV's 110 degree west longitude orbital slot. The DTV-1R satellite adds additional capacity for DIRECTV U.S.' basic programming and local network channels. Galaxy-XI will become an integral component of PanAmSat's Galaxy cable neighborhood and is expected to be operational in the first half of 2000. PanAmSat expects to add additional satellites as part of its comprehensive satellite expansion and restoration plan adopted in 1998. The additional satellites are intended to meet the expected demand for additional satellite capacity, replace capacity affected by satellite anomalies, and provide added backup to existing capacity. In connection with this plan, two satellites were successfully launched, Galaxy-XI in 1999 and Galaxy-XR in January 2000. In addition, five satellites are now under construction for PanAmSat by Hughes Space and Communications. PanAmSat expects to launch four of these satellites in 2000 and one in 2001. In the third quarter of 2000, DIRECTV U.S. expects to launch DIRECTV 5, which will replace the DIRECTV 4 satellite located at 119 degree west longitude. DIRECTV U.S. has also contracted with Hughes II-4 HUGHES ELECTRONICS CORPORATION Space and Communications to build DIRECTV 4S, a high-powered spot-beam satellite that will provide additional capacity for new local channel service or other new services beginning in 2002. On March 17, 1999, Hughes announced its intention to make an initial investment of $1.4 billion in the Spaceway satellite system. The Spaceway system, when completed, will provide high-speed, two-way communications of video, voice and data directly to companies and individual consumers. Hughes expects that this initial investment will allow it to construct three high- powered satellites to provide broadband network services ``on demand'' for video-conferencing, data transfer and other purposes in North America by 2003. Hughes is currently assessing the possibility of providing Spaceway services to most of the world using high-orbit satellites as well as complementary services from a low-orbit system. These subsequent phases would require significant additional investment. Hughes' in-orbit satellites are subject to the risk of failing prematurely due to, among other things, mechanical failure, collision with objects in space or an inability to maintain proper orbit. Satellites are subject to the risk of launch delay and failure, destruction and damage while on the ground or during launch and failure to become fully operational once launched. Delays in the production or launch of a satellite or the complete or partial loss of a satellite, in-orbit or during launch, could have a material adverse impact on the operation of Hughes' businesses. With respect to both in-orbit and launch problems, insurance carried by PanAmSat and Hughes does not compensate for business interruption or loss of future revenues or customers. Hughes has, in the past, experienced technical anomalies on some of its satellites. Service interruptions caused by these anomalies, depending on their severity, could result in claims by affected customers for termination of their transponder agreements, cancellation of other service contracts or the loss of other customers. Results of Operations 1999 compared to 1998 Overall Revenues. Revenues increased 59.8% to $5,560.3 million in 1999 from $3,480.6 million in 1998. The Direct-To-Home Broadcast segment was the primary contributor to the growth in revenues resulting from record subscriber growth in both the U.S. and Latin America DIRECTV businesses and from additional revenues for the U.S. DIRECTV businesses from the PRIMESTAR and USSB acquisitions. Also contributing to the growth in revenues were increased sales of DIRECTV receiver equipment at the Network Systems segment. Operating Costs and Expenses. Operating costs and expenses grew to $5,988.3 million in 1999 from $3,526.8 million in 1998. Broadcast programming and other costs increased $863.7 million during 1999 due primarily to the added costs for the PRIMESTAR by DIRECTV and premium channel services. Cost of products sold increased $348.0 million in 1999 from 1998 due to the increased sales of DIRECTV receiver equipment discussed above and the write-off of $91.5 million of inventory associated with the discontinued wireless product lines at the Network Systems segment. Selling, general and administrative expenses increased by $987.0 million due primarily to increased costs at the Direct-To-Home Broadcast segment for subscriber acquisition costs and added costs for the PRIMESTAR by DIRECTV business and a charge of $180.6 million at the Network Systems segment resulting from the write-off of receivables, licenses and equipment associated with the discontinued wireless product lines. Depreciation and amortization increased $262.8 million in 1999 over 1998 due primarily to added goodwill, intangibles and property, plant and equipment resulting from the acquisitions discussed above, and additions to PanAmSat's satellite fleet. EBITDA. Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"). EBITDA is defined as operating profit (loss), plus depreciation and amortization. EBITDA is not presented as an alternative measure of operating results or cash flow from operations, as determined in accordance with generally accepted accounting principles. However, Hughes believes EBITDA is a meaningful measure of Hughes' performance and that of its business units. EBITDA is a performance measurement commonly used by other communications, entertainment and media service providers and therefore can be used to analyze and compare Hughes' financial performance to that of its competitors. EBITDA is also a measurement used for certain of Hughes' debt covenants and is used by rating agencies in determining credit ratings. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect funds available for investment in the business of Hughes, dividends or other discretionary uses. EBITDA margin is calculated by dividing EBITDA by total revenues. EBITDA declined to $222.7 million in 1999 from $341.7 million in 1998. The decline was attributable to charges incurred at the Network Systems segment which included the $272.1 million charge related to the discontinued wireless product lines and the $11.0 million write-off related to the termination of the APMT contract. These declines were offset by an increase in EBITDA of $145.7 million at the Direct-To-Home Broadcast segment and $65.5 million at the Satellite Services segment. Operating Loss. Hughes' operating loss was $428.0 million in 1999, compared to $46.2 million in 1998. The increased operating loss resulted from the decrease in EBITDA, discussed above, and higher II-5 HUGHES ELECTRONICS CORPORATION depreciation and amortization at the Direct-To-Home Broadcast segment resulting primarily from goodwill from recent acquisitions. Interest Income and Expense. Interest income declined to $27.0 million in 1999 compared to $112.3 million in 1998. This change resulted from a decline in cash and cash equivalents. Interest expense increased to $122.7 million in 1999 from $17.5 million in 1998. The increase in interest expense resulted from an increase in debt and interest associated with liabilities for above-market programming contracts assumed in the acquisitions of PRIMESTAR and USSB. The changes in cash and cash equivalents and debt are discussed in more detail below under "Liquidity and Capital Resources." Other, Net. Other, net declined to a net expense of $136.3 million in 1999 from a net expense of $151.8 million in 1998. Other, net for 1999 included losses from equity method investments of $189.2 million of which $134.9 million related to DIRECTV Japan, offset by the gain of $39.4 million from the sale of securities in the HSS initial public offering and other miscellaneous items. Other, net for 1998 included losses from equity method investments of $128.3 million, of which $83.2 million related to DIRECTV Japan, and a provision of $34.5 million for estimated losses associated with the bankruptcy filings of two Network Systems segment customers. These losses were offset by the gains on the sale of property and investments of about $15.0 million. Income Taxes. Hughes recognized an income tax benefit of $236.9 million in 1999 compared to $142.3 million in 1998. The higher tax benefit in 1999 resulted primarily from higher losses from continuing operations. The income tax benefit in 1998 included a favorable adjustment relating to an agreement with the Internal Revenue Service regarding the treatment of research and experimentation credits for the years 1983 through 1995. Income (Loss) From Continuing Operations. Hughes reported a loss from continuing operations in 1999 of $391.1 million compared with 1998 income from continuing operations of $63.5 million. Discontinued Operations. Revenues for the satellite systems manufacturing businesses decreased to $2,240.7 million for 1999 from revenues of $2,820.4 million for 1998. Revenues, excluding intercompany transactions, were $1,780.4 million for 1999 and $2,483.3 million for 1998. The decrease in revenues was principally due to contract revenue adjustments and delayed revenue recognition that resulted from increased development costs and schedule delays on several new product lines and decreased activity associated with the contract with ICO Global Communications (Operations) Ltd. The satellite systems manufacturing businesses reported an operating loss of $0.6 million for 1999 compared to operating profit of $286.3 million for 1998. The reported operating loss, excluding intercompany transactions, amounted to $10.4 million for 1999 compared to operating profit of $295.3 million for 1998. The 1999 operating loss included a pre-tax charge of $125.0 million that resulted from increased development costs and schedule delays on several new product lines, a one-time pre-tax charge of $81.0 million resulting from the termination of the APMT contract and decreased activity associated with a contract with ICO Global Communications (Operations) Ltd. Hughes had maintained a lawsuit against the U.S. government since September 1973 regarding the U.S. government's infringement and use of a Hughes patent covering `` Velocity Control and Orientation of a Spin Stabilized Body,'' principally satellites (the `` Williams patent''). On April 7, 1998, the U.S. Court of Appeals for the Federal Circuit reaffirmed earlier decisions in the Williams patent case, including an award of $114.0 million in damages, plus interest. In March 1999, Hughes received a payment from the U.S. government as a final settlement of the suit and as a result, recognized as income from discontinued operations a pre-tax gain of $154.6 million. Accounting Changes. In 1998, Hughes adopted American Institute of Certified Public Accountants Statement of Position 98-5, Reporting on the Costs of Start- Up Activities. Statement of Position 98-5 requires that all start-up costs previously capitalized be written off and recognized as a cumulative effect of accounting change, net of taxes, as of the beginning of the year of adoption. On a prospective basis, these types of costs are required to be expensed as incurred. The unfavorable cumulative effect of this accounting change at January 1, 1998 was $9.2 million after-tax. Direct-To-Home Broadcast Segment Revenues for the Direct-To-Home Broadcast segment more than doubled to $3,785.0 million in 1999 from $1,816.1 million in 1998. Operating losses grew to $292.1 million in 1999 from $228.1 million in 1998 while EBITDA increased to $19.9 million in 1999 from negative $125.8 million in 1998. United States. The DIRECTV U.S. businesses reported revenues of $3,404.6 million in 1999, more than twice the reported revenues of $1,604.1 million in 1998. The increase in revenues resulted from an increase in subscribers for the high-power business and added revenues from PRIMESTAR by DIRECTV and premium channel services. Subscribers for the high-power DIRECTV business increased by 2.2 million subscribers (1.6 million excluding PRIMESTAR conversions and incremental subscribers from USSB) during 1999 to 6.7 million subscribers at the end of 1999. Including PRIMESTAR by DIRECTV subscribers there were over 8 million subscribers at the end of 1999. Average monthly revenue per subscriber for the high-power business increased to $58 for 1999 from $46 for 1998. This increase resulted primarily from the addition of the premium channel services in April of 1999. II-6 HUGHES ELECTRONICS CORPORATION EBITDA for 1999 was $151.2 million in 1999 compared to negative $17.9 million in 1998. The change in EBITDA resulted from the increased revenues that were partially offset by increased subscriber acquisition costs and added operating costs from the PRIMESTAR by DIRECTV and premium channel services. The DIRECTV U.S. businesses reported an operating loss of $97.9 million in 1999 compared to $100.0 million in 1998. The decreased operating loss resulted from increased EBITDA which was generally offset by increased depreciation and amortization that resulted from the PRIMESTAR and USSB acquisitions. Latin America. Revenues for the Latin America DIRECTV businesses increased 82.3% to $315.3 million in 1999 from $173.0 million in 1998. The increase in revenues reflects an increase in subscribers and the consolidation of the GGM, GLB and SurFin businesses. Subscribers grew to 804,000 at the end of 1999 from 484,000 at the end of 1998. Average revenue per subscriber decreased to $36 in 1999 from $41 in 1998. The decline in average revenue per subscriber resulted from currency devaluations in Brazil. EBITDA was negative $105.6 million in 1999 compared to negative $93.0 million in 1998. The change in EBITDA resulted primarily from additional losses from the consolidation of GGM and GLB. The Latin America DIRECTV businesses incurred an operating loss of $168.4 million in 1999 compared to $113.2 million in 1998. The increased operating loss resulted from the decline in EBITDA and higher depreciation and amortization that resulted from the GGM, GLB and SurFin transactions. Satellite Services Segment Revenues increased for the Satellite Services segment by $43.3 million to $810.6 million in 1999 from $767.3 million in 1998. This increase was primarily due to increased operating lease revenues, partially offset by a decrease in sales and sales-type lease revenues. Operating lease revenues, which reflect long-term satellite service agreements from which PanAmSat derives revenues over the duration of the contract, were 97% of total 1999 revenues and increased by 6.9% to $787.5 million from $736.7 million in 1998. Total sales and sales-type lease revenues were $23.1 million for 1999 compared to $30.6 million for 1998. EBITDA was $618.8 million compared to $553.3 million in 1998. The increase was principally due to higher revenue that resulted from the commencement of new service agreements on additional satellites placed into service in 1999 and lower leaseback expense resulting from the exercise of certain early buy-out opportunities under sale-leaseback agreements during 1999. Operating profit was $338.3 million in 1999, an increase of $20.0 million over 1998. The increase resulted from the higher EBITDA in 1999 offset by increased depreciation expense resulting from increased capital from additions to the satellite fleet. Backlog for the Satellite Services segment, which consists primarily of operating leases on satellite transponders, was $4,856.3 million in 1999 compared to $4,461.9 million in 1998. Network Systems Segment Revenues for the Network Systems segment increased 28.6% to $1,384.7 million in 1999 from $1,076.7 million in 1998. The higher revenues resulted from greater shipments of DIRECTV receiver equipment. Shipments of DIRECTV receiver equipment totaled about 2.1 million units in 1999 compared to about 0.7 million units in 1998. The Network Systems segment reported negative EBITDA of $178.1 million in 1999 compared to EBITDA of $52.6 million in 1998. The Network Systems segment incurred an operating loss of $227.3 million in 1999 compared to operating profit of $10.9 million in 1998. The decline in EBITDA and operating profit resulted from the $272.1 million charge related to the discontinuation of the wireless product lines, offset in part by the increased sales of DIRECTV receiver equipment. Backlog for the Network Systems segment, which consists primarily of private business networks and satellite-based mobile telephony equipment orders, was $996.0 million in 1999 compared to $1,333.4 million in 1998. Eliminations and Other The elimination of revenues increased to $420.0 million in 1999 from $179.5 million in 1998 due primarily to increased manufacturing subsidies received by the Network Systems segment from the DIRECTV businesses which resulted from the increased DIRECTV receiver equipment shipments. Operating losses for "elimination and other" increased to $246.9 million in 1999 from $147.3 million in 1998. The increase was primarily due to increases in eliminations of intercompany profit and corporate expenditures. The increased intercompany profit elimination resulted from the increased intercompany sales noted above and increased corporate expenditures resulted primarily from higher pension and other employee costs. 1998 compared to 1997 Overall II-7 HUGHES ELECTRONICS CORPORATION Revenues. Revenues in 1998 increased 22.6% to $3,480.6 million compared with $2,838.3 million in 1997. Each of Hughes' business segments contributed to the growth in revenue, which included continued strong subscriber growth in the Direct-to-Home Broadcast segment, the effect of the PanAmSat merger and increased operating lease revenues for video, data and Internet-related services in the Satellite Services segment and increased sales of DIRECTV receiver equipment in the Network Systems segment. Operating Costs and Expenses. Operating costs and expenses increased to $3,526.8 million in 1998 from $2,794.8 million in 1997. Broadcast programming and other costs increased $299.1 million during 1998 due to increased programming costs at the Direct-To-Home Broadcast segment and the effects of a full year of costs from PanAmSat. The increase in costs of products sold of $68.2 million during 1998 resulted primarily from the costs related to the increased shipments of DIRECTV receiver equipment. Selling, general and administrative expenses increased $237.1 million in 1998 due primarily to increased marketing and subscriber acquisition costs in the Direct-to-Home Broadcast segment and increased expenditures to support the growth in the remaining business segments. The increase in depreciation and amortization expense of $127.6 million in 1998 resulted from increased goodwill amortization related to the PanAmSat transactions and increased capital expenditures in the Direct-to-Home Broadcast and Satellite Services segments. EBITDA increased slightly during 1998 to $341.7 million from $303.8 million in 1997. The increase in EBITDA resulted from the full year effects of PanAmSat and improved EBITDA at DIRECTV U.S. These EBITDA improvements were offset by higher corporate expenses, primarily related to pension and other employee costs, and a decline in EBITDA in 1998 at the Network Systems segment due principally to lower sales of wireless telephone systems and private business networks in the Asia-Pacific region and provisions for estimated losses associated with uncollectible amounts due from certain wireless customers. Operating Profit (Loss). Hughes incurred an operating loss of $46.2 million in 1998 compared with operating profit of $43.5 million in 1997. This decline resulted from increased goodwill amortization, resulting primarily from the PanAmSat transactions, which more than offset the improvement in EBITDA. Interest Income and Expense. Interest income increased to $112.3 million in 1998 compared to $33.0 million in 1997, due primarily to higher cash balances resulting from the recapitalization of Hughes. Interest expense decreased $73.5 million to $17.5 million in 1998 versus $91.0 million in 1997 resulting from the repayment of debt, arising from the PanAmSat merger, at the end of 1997. Other, net. Other, net for 1998 relates primarily to losses from unconsolidated subsidiaries of $128.3 million, attributable principally to equity investments, including American Mobile Satellite Corporation and DIRECTV Japan, and a provision for estimated losses associated with bankruptcy filings by two customers of the Network Systems segment. Other, net for 1997 includes a $489.7 million pre-tax gain recognized in connection with the May 1997 PanAmSat merger offset by losses from unconsolidated subsidiaries of $72.2 million. Income Taxes. Hughes recorded a tax benefit of $142.3 million in 1998 compared to a tax provision of $162.0 million in 1997. Income taxes in 1998 benefited from the favorable adjustment relating to a fourth quarter 1998 agreement with the Internal Revenue Service regarding the treatment of research and experimentation costs for the years 1983 through 1995 and also reflect the tax benefit recorded for the losses incurred from continuing operations. Income (Loss) From Continuing Operations. Income from continuing operations was $63.5 million in 1998 compared with $236.9 million in 1997. Discontinued Operations and Extraordinary Item. On December 15, 1997, Hughes Avicom International, Inc. was sold to Rockwell Collins, Inc., resulting in an after-tax gain of $62.8 million. Hughes recorded an extraordinary after-tax charge of $20.6 million in 1997 related to the refinancing of PanAmSat's debt. For additional information see Note 8 to the financial statements. Also included in discontinued operations are the results of the satellite systems manufacturing businesses. Revenues for the satellite systems manufacturing businesses increased 13.2% in 1998 to $2,820.4 million from $2,491.9 million in 1997. Revenues, excluding intercompany sales, were $2,483.3 million in 1998 compared to $2,290.0 million in 1997. The increase in revenues resulted primarily from higher commercial satellite sales to customers such as Thuraya Satellite Telecommunications Company, PanAmSat, ICO Global Communications and Orion Asia Pacific Corporation. Operating profit for the satellite systems manufacturing businesses in 1998 was $286.3 million, an increase of 52.9% over $187.2 million in 1997. Operating profit, excluding intercompany transactions, was $295.3 million in 1998 compared to $241.9 million in 1997. The increase was primarily due to the higher commercial satellite sales noted above. Accounting Changes. In 1998, Hughes adopted American Institute of Certified Public Accountants Statement of Position 98-5, Reporting on the Costs of Start- Up Activities. Statement of Position 98-5 requires that all start-up costs previously capitalized be written off and recognized as a cumulative effect of accounting change, net of taxes, as of the beginning of the year of adoption. On a prospective basis, these types of costs are required to be expensed as incurred. The unfavorable cumulative effect of this accounting change at January 1, 1998 was $9.2 million after-tax. II-8 HUGHES ELECTRONICS CORPORATION Direct-To-Home Broadcast Segment The Direct-to-Home Broadcast segment's revenues for 1998 increased 42.2% to $1,816.1 million from $1,276.9 million in 1997. EBITDA for the segment improved in 1998 to negative $125.8 million compared to negative $168.5 million in 1997. The operating loss for the segment declined to $228.1 million in 1998 from $254.6 million in 1997. United States. The DIRECTV U.S. business was the biggest contributor to the segment's revenue growth with revenues of $1,604.1 million for 1998, a 45.4% increase over prior year's revenues of $1,103.3 million. The large increase in revenues resulted primarily from an increase in subscribers. Subscribers grew to about 4.5 million at the end of 1998 compared to 3.3 million at the end of 1997. Average monthly revenue per subscriber also increased during 1998 to $46, compared to $44 for 1997. DIRECTV U.S. reported negative EBITDA of $17.9 million in 1998 compared to negative EBITDA of $68.0 million in 1997. The full-year 1998 operating loss for DIRECTV U.S. was $100.0 million compared with $137.0 million in 1997. The improvement in EBITDA and lower operating loss was principally due to increased subscriber revenues which more than offset increased sales and marketing expenditures. Latin America. Revenues for the Latin America DIRECTV businesses increased to 173.0 million in 1998 from $70.0 million in 1997. The increase in revenues resulted from an increase in subscribers to 484,000 at the end of 1998 from 300,000 at the end of 1997. EBITDA was negative $93.0 million in 1998 compared to negative $96.5 million in 1997. The operating loss was $113.2 million in 1998 compared with $111.8 million in 1997. The increased operating loss resulted from higher sales and marketing expenditures and subscriber acquisition costs. Satellite Services Segment Revenues for the Satellite Services segment in 1998 increased 21.8% to $767.3 million from $629.9 million in 1997. The increase in revenues was due to the May 1997 PanAmSat merger and increased operating lease revenues from the commencement of service agreements for full-time video distribution, as well as short-term special events and an increase in data and Internet-related service agreements. The increase was partially offset by a decrease in sales and sales- type lease revenues. As a result of the increased revenues described above, the Satellite Services segment's EBITDA and operating profit improved. EBITDA increased to $553.3 million in 1998 from $438.1 million in 1997. Operating profit increased 8.7% to $318.3 million in 1998, compared with the prior year's operating profit of $292.9 million. Operating profit margin in 1998 declined to 41.5% from 46.5% in the prior year principally due to goodwill amortization associated with the PanAmSat merger, a provision for losses relating to the May 1998 failure of PanAmSat's Galaxy IV satellite and increased depreciation expense resulting from increased capital expenditures by PanAmSat. Backlog for the Satellite Services segment, which consists primarily of operating leases on satellite transponders, was $4,461.9 million in 1998 compared to $5,772.5 million in 1997. Network Systems Segment Revenues for the Network Systems segment in 1998 were $1,076.7 million compared with $1,011.3 million in 1997. The increase in revenues resulted from the growth in sales of DIRECTV receiver equipment and increased sales of private business networks and satellite-based mobile telephony equipment offset by lower international sales of wireless telephony systems and private business networks, primarily in the Asia-Pacific region. EBITDA was $52.6 million in 1998, a decrease of $53.5 million from 1997. Operating profit in 1998 was $10.9 million compared with $74.1 million in 1997 and operating profit margin declined to 1.0% from 7.3%. These decreases were primarily due to a $26.0 million provision for estimated losses associated with the bankruptcy filing by a customer, provision for uncollectible amounts due from certain wireless customers and lower international sales of wireless telephony systems and private business networks, primarily in the Asia Pacific region. Backlog for the Network Systems segment, which consists primarily of private business networks and satellite-based mobile telephony equipment orders, was $1,333.4 million in 1998 compared to $1,101.4 million in 1997. Eliminations and Other The elimination of revenues increased $99.7 million in 1998 to $179.5 million due primarily to increased intercompany activity resulting from the PanAmSat merger and increased manufacturing subsidies received by the Network Systems segment from DIRECTV that resulted from the increased shipment of DIRECTV receiver equipment. Operating losses for "eliminations and other" increased to $147.3 million in 1998 from $68.9 million in 1997. The increase was primarily due to increases in eliminations of intercompany profit and corporate expenditures. The increased intercompany profit elimination resulted from the increased intercompany sales noted above and increased corporate expenditures resulted primarily from higher pension and other employee costs. II-9 HUGHES ELECTRONICS CORPORATION Liquidity and Capital Resources Cash and cash equivalents were $238.2 million at December 31, 1999 compared to $1,342.0 million at December 31, 1998. The decrease in cash resulted primarily from increased investing activities, offset in part by increased borrowings and the issuance of preferred stock. Cash provided by operating activities was $379.5 million in 1999, compared to $612.1 million in 1998 and $90.6 million in 1997. The change in 1999 from 1998 resulted primarily from increased cash requirements for working capital offset by increased income from continuing operations excluding non-cash adjustments such as depreciation and amortization, the loss resulting from the discontinuation of the wireless product lines and deferred taxes. The change in 1998 from 1997 resulted primarily from increased income from continuing operations excluding non-cash adjustments and decreased working capital requirements. Cash used by investing activities was $3,941.8 million in 1999, compared to $2,128.5 million in 1998 and $2,115.6 million in 1997. The increase in 1999 investing activities reflects the acquisitions of PRIMESTAR and the related Tempo Satellite assets, USSB, SurFin, GGM and GLB. The 1999 increase is also due to investments in DIRECTV Japan convertible bonds, the early buy-out of satellite sale-leasebacks at PanAmSat and an increase in expenditures for property, compared to 1998. The increase in 1998 investing activities reflects the purchase of an additional 9.5% interest in PanAmSat, the early buy-out of satellite sale-leasebacks at PanAmSat and an increase in expenditures for satellites, compared to 1997, offset in part by proceeds from insurance claims for the full or partial loss of certain PanAmSat satellites. Cash provided by (used in) financing activities was $2,577.5 million in 1999, compared to $(63.6) million in 1998 and $5,014.0 million in 1997. 1999 financing activities reflect increased borrowings and proceeds from the issuance of preferred stock. 1998 financing activities include the payment to General Motors for the Delco post-closing price adjustment stemming from the Hughes Transactions, offset in part by net long-term borrowings. 1997 financing activities reflect the impact of the PanAmSat merger, the Hughes Transactions and cash contributions from the Parent Company. Cash provided by (used in) discontinued operations was $(119.0) million in 1999, compared to $138.3 million in 1998 and $(211.5) million in 1997. The decrease in 1999 was due to increased working capital requirements, increased development costs, the termination of the APMT contract and decreased activity associated with the ICO contract. The increase in 1998 compared to 1997 was due to a decrease in working capital requirements. Liquidity Measurement. As a measure of liquidity, the current ratio (ratio of current assets to current liabilities) at December 31, 1999 and 1998 was 1.46 and 3.03, respectively. Working capital decreased by $1,513.3 million to $1,215.9 million at December 31, 1999 from $2,729.2 million at December 31, 1998. The change in working capital resulted principally from the decrease in cash and cash equivalents discussed above. Property and Satellites. Property, net of accumulated depreciation, increased $540.0 million to $1,223.0 million in 1999 from $683.0 million in 1998. The increase in property resulted primarily from capital expenditures of about $506.4 million, additions resulting from acquisitions of about $281.6 million, offset by depreciation of $227.0 million. The increase in capital expenditures of $262.5 million in 1999 over 1998 was primarily due to an increase in subscriber leased DIRECTV receiver equipment used in the conversion of PRIMESTAR subscribers. Satellites, net of accumulated depreciation, increased $709.8 million to $3,907.3 million in 1999 from the $3,197.5 million reported in 1998. Capital expenditures, including expenditures related to satellites, increased to $1,665.3 million in 1999 from $1,328.8 million in 1998. 1999 capital expenditures include $789.4 million for the construction of satellites and $369.5 million for the early buy-out of satellite sale-leasebacks. Common Stock Dividend Policy and Use of Cash. As discussed in Note 15 to the financial statements, since the completion of the recapitalization of Hughes in late 1997, the GM Board has not paid, and does not currently intend to pay in the foreseeable future, cash dividends on its Class H common stock. Similarly, since such time, Hughes has not paid dividends on its common stock to GM and does not currently intend to do so in the foreseeable future. Future Hughes earnings, if any, are expected to be retained for the development of the businesses of Hughes. Hughes expects to have significant cash requirements in 2000 primarily due to capital expenditures of approximately $1.5 to $2.0 billion for satellites and property. In addition, Hughes expects to increase its investment in affiliated companies, primarily related to its international DIRECTV businesses. These cash requirements are expected to be funded from a combination of cash provided from operations, cash to be received upon completion of the Boeing transaction, amounts available under credit facilities and debt and equity offerings, as needed. Debt and Credit Facilities. Short-Term Borrowings. In October 1999, Hughes issued $500.0 million ($498.9 million net of unamortized discount) of floating rate notes to a group of institutional investors in a private placement. The notes bear interest at a variable rate which was 7.45% at December 31, 1999 . Interest is payable quarterly and the notes are due and payable on October 23, 2000. Notes Payable. PanAmSat issued five, seven, ten and thirty-year notes totaling $750.0 million in January 1998. The outstanding principal balances and interest rates for the five, seven, ten and thirty-year notes as of December 31, 1999 were $200 million at 6.0%, $275 million at 6.125%, $150 million at 6.375% and $125 million at $6.875%, respectively. Principal on the notes is payable at maturity, while interest is payable semi-annually. II-10 HUGHES ELECTRONICS CORPORATION In July 1999, in connection with the early buy-out of satellite sale- leasebacks, PanAmSat assumed $124.1 million of variable rate notes, all of which were outstanding at December 31, 1999. The notes bear interest at various rates. The weighted average interest rate on the notes at December 31, 1999 was 6.75%. The notes mature on various dates through January 2, 2002. Revolving Credit Facilities. Hughes has three unsecured revolving credit facilities totaling $1.6 billion, consisting of a $750.0 million multi-year facility, a $350.0 million 364-day facility, and a $500.0 million bridge facility. The multi-year credit facility provides for a commitment of $750.0 million through December 5, 2002 and borrowings bear interest at various rates, of which the weighted average rate at December 31, 1999 was 7.09%. The 364-day facility provides for a commitment of $350.0 million through November 22, 2000. These facilities also provide backup capacity for Hughes' commercial paper program. The bridge facility provides for a commitment of $500.0 million through the earlier of November 22, 2000 or the receipt of proceeds from the issuance of any debt securities of Hughes in a public offering. $500.0 million was outstanding under the multi-year facility at December 31, 1999. No amounts were outstanding under the commercial paper program, 364-day, or bridge facilities at December 31, 1999. PanAmSat maintains a $500.0 million multi-year revolving credit facility that provides for short-term and long-term borrowings and a $500.0 million commercial paper program that provides for short-term borrowings. The multi-year revolving credit facility provides for a commitment through December 24, 2002 . Borrowings under the credit facility and commercial paper program are limited to $500.0 million in the aggregate. No amounts were outstanding under either the multi- year revolving credit facility or the commercial paper program at December 31, 1999. At December 31, 1999, Hughes' 75% owned subsidiary, SurFin, had a total of $227.9 million outstanding under a $400.0 million unsecured revolving credit facility expiring on June 2002. Borrowings under the credit facility bear interest at various rates of interest. The weighted average interest rate on these borrowings at December 31, 1999 was 6.84%. Other. At December 31, 1999, GLB had a total of $24.3 million outstanding under variable rate notes bearing interest at various rates. The weighted average interest rate of the notes was 11.9% at December 31, 1999. Principal is payable in varying amounts at maturity in April and May 2002, and interest is payable monthly. Other long-term debt totaling $16.2 million and $28.9 million at December 31, 1999 and 1998, respectively, consisted primarily of notes bearing fixed rates of interest of 9.61% to 11.11%. Principal is payable at maturity in April 2007, while interest is payable semi-annually. As part of a debt refinancing program undertaken by PanAmSat in 1997, an extraordinary charge of $20.6 million ($34.4 million before taxes) was recorded that resulted from the excess of the price paid for the debt over its carrying value, net of deferred financing costs. Hughes has filed a shelf registration statement with the Securities and Exchange Commission with respect to an issuance of up to $2.0 billion of debt securities from time to time. No amounts have been issued as of December 31, 1999. Acquisitions, Investments and Divestitures. On March 1, 2000, Hughes announced that DIRECTV Japan's operations will be discontinued and that its subscribers would migrate to SkyPerfecTV. As a result of this transaction, Hughes will acquire a 6.8% interest in SkyPerfecTV, which is expected to complete an IPO during its fiscal year ending March 31, 2001. Hughes will be required to fund a substantial portion of the costs to be incurred over the next six to nine months to exit the DIRECTV Japan business. Hughes will accrue such exit costs during the first quarter of fiscal 2000. The first quarter charge will be offset by the fair value of the SkyPerfecTV interest received; however the amounts are not yet estimable. In addition, Hughes will continue to record its share of DIRECTV Japan's operating losses during 2000. On January 13, 2000, Hughes announced that it had reached an agreement to sell its satellite systems manufacturing businesses to Boeing for $3.75 billion in cash. The final transaction, which is subject to regulatory approval, is expected to close in the second or third quarter of 2000 and result in an after- tax gain in excess of $1 billion. The financial results for the satellite systems manufacturing businesses are treated as discontinued operations for all periods presented herein. Also on January 13, 2000, Hughes announced the discontinuation of its mobile cellular and narrowband local loop product lines at Hughes Network Systems. As a result of this decision, Hughes recorded a fourth quarter 1999 pre-tax charge to continuing operations of $272.1 million. The charge represents the write-off of receivables and inventories, licenses, software and equipment with no alternative use. In September and November of 1999, DIRECTV Japan raised a total of approximately $281 million through the issuance of bonds, convertible into common stock, to five of its major shareholders, including $244.7 million issued to Hughes. On July 28, 1999, GLA acquired GLB, the exclusive distributor of DIRECTV in Brazil, from Tevecap S.A. for approximately $114.0 million plus the assumption of debt. In connection with the transaction, Tevecap also sold its 10% equity interest in GLA to Hughes and The Cisneros Group of Companies, the II-11 HUGHES ELECTRONICS CORPORATION remaining GLA partners, which increased Hughes' ownership interest in GLA to 77.8%. As part of the transaction, Hughes also increased its ownership interest in SurFin from 59.1% to 75.0%. The total consideration paid in the transactions amounted to approximately $101.1 million. On May 20, 1999, Hughes acquired by merger all of the outstanding capital stock of USSB, a provider of premium subscription television programming via the digital broadcasting system that it shares with DIRECTV. The total consideration of about $1.6 billion paid in July 1999, consisted of about $0.4 billion in cash and 22.6 million shares of Class H common stock. On April 28, 1999, Hughes completed the acquisition of PRIMESTAR's 2.3 million subscriber medium-power direct-to-home satellite business. The purchase price consisted of $1.1 billion in cash and 4.9 million shares of Class H common stock, for a total purchase price of $1.3 billion. As part of the agreement to acquire PRIMESTAR, Hughes agreed to purchase the high-power satellite assets and related orbital frequencies of Tempo Satellite Inc., a wholly-owned subsidiary of TCI Satellite Entertainment Inc. The purchase price for the Tempo Satellite assets consisted of $500 million in cash. Of this purchase price, $150 million was paid on March 10, 1999 for a satellite that has not yet been launched and the remaining $350 million was paid on June 4, 1999 for an in-orbit satellite and 11 related satellite orbital frequencies. In February 1999, Hughes acquired an additional ownership interest in GGM, a Latin America local operating company which is the exclusive distributor of DIRECTV in Mexico, from Grupo MVS, S.R.L. de C.V. Hughes' equity ownership represents 49.0% of the voting equity and all of the non-voting equity of GGM. In October 1998, Hughes acquired from Grupo MVS an additional 10.0% interest in GLA, increasing Hughes' ownership interest to 70.0%. Hughes also acquired an additional 19.8% interest in SurFin, a company providing financing of subscriber receiver equipment for certain local operating companies located in Latin America and Mexico, increasing Hughes' ownership percentage from 39.3% to 59.1%. The aggregate purchase price for these transactions was $197.0 million in cash. In May 1998, Hughes purchased an additional 9.5% interest in PanAmSat for $851.4 million in cash, increasing its ownership interest in PanAmSat to 81.0%. PanAmSat was originally acquired in May 1997, when Hughes and PanAmSat completed the merger of their respective satellite service operations into a new publicly- held company, which retained the name PanAmSat Corporation. Hughes contributed its Galaxy satellite services business in exchange for a 71.5% interest in the new company. Existing PanAmSat stockholders received a 28.5% interest in the new company and $1.5 billion in cash. Such cash consideration and other funds required to consummate the merger were funded by new debt financing totaling $1,725.0 million borrowed from GM, which was subsequently repaid in December 1997. The PanAmSat merger was treated as a partial sale of the Galaxy business by Hughes and resulted in a one-time pre-tax gain of $489.7 million ($318.3 million after-tax). The financial information included herein, reflect the acquisitions discussed above from their respective dates of acquisition. The acquisitions were accounted for by the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets acquired and the liabilities assumed based on the estimated fair values at the date of acquisition. The excess of the purchase price over the estimated fair values of the net assets acquired has been recorded as goodwill, resulting in goodwill additions of $3,612.4 million and $702.9 million for the years ended December 31, 1999 and 1998, respectively. The December 31, 1999 financial statements for the PRIMESTAR transaction reflect a preliminary allocation of the purchase price for the transaction based upon information currently available. Adjustments relating to the tangible assets, including equipment located on customer premises; intangible assets, including customer lists and dealer network; and accrued liabilities for programming contracts and leases with above-market rates are estimates pending the completion of independent appraisals currently in process. Additionally, the adjustment to recognize the benefit of net operating loss carryforwards of USSB represents a preliminary estimate pending further review and analysis by Hughes management. The foregoing appraisals, review and analysis are expected to be completed by March 31, 2000. Accordingly, the final purchase price allocations may be different from the amounts reflected herein. As a result of the acquisitions of GGM, SurFin and GLB, foreign currency risk, as more fully described in ``Market Risk Disclosure,'' has increased for Hughes and may increase in the future. On December 15, 1997, Hughes sold substantially all of the assets and liabilities of the Hughes Avicom business to Rockwell Collins, Inc. for cash, which resulted in an after-tax gain of $62.8 million. Hughes Avicom is treated as a discontinued operation for all periods prior to its disposition. Also, in December 1997, Hughes repurchased from AT&T for $161.8 million, a 2.5% equity interest in DIRECTV, ending AT&T's marketing agreement to distribute the DIRECTV direct broadcast satellite television service and DIRECTV(TM) receiver equipment. New Accounting Standards. In September 1999, the Financial Accounting Standards Board ("FASB") issued Emerging Issues Task Force Issue 99-10 ("EITF 99-10"), Percentage Used to Determine the Amount of Equity Method Losses. EITF 99-10 addresses the percentage of ownership that should be used to compute equity method losses when the investment has been reduced to zero and the investor holds other securities of the investee. EITF 99-10 requires that equity method losses should not be recognized solely on the percentage of common stock owned; rather, an entity-wide approach should be II-12 HUGHES ELECTRONICS CORPORATION adopted. Under such an approach, equity method losses must be recognized based on the ownership level that includes other equity securities (e.g., preferred stock) and loans/advances to the investee or based on the change in the investor's claim on the investee's book value. Hughes adopted EITF 99-10 during the third quarter of 1999 which resulted in Hughes recording a higher percentage of DIRECTV Japan's losses subsequent to the effective date of September 23, 1999. The unfavorable impact of adopting EITF 99-10 was $39.0 million after-tax. In June 1998, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 requires all derivatives to be recorded as either assets or liabilities and the instruments to be measured at fair value. Gains or losses resulting from changes in the values of those derivatives are to be recognized immediately or deferred depending on the use of the derivative and whether or not it qualifies as a hedge. Hughes plans to adopt SFAS No. 133, as amended, by January 1, 2001, as required. Hughes does not expect that the adoption of SFAS No. 133 will have a material impact on Hughes' results of operations and financial position. Commitments and Contingencies Hughes may be required to make a cash payment to, or receive a cash payment from, Raytheon in connection with the merger of the defense electronics business of Hughes with Raytheon in 1997. The amount of any such cash payment to or from Raytheon, if any, is not determinable at this time. There is a pending grand jury investigation into whether Hughes should be accused of criminal violations of the export control laws arising out of the participation of two of its employees on a committee formed to review the findings of Chinese engineers regarding the failure of a Long March rocket in China in 1996. Hughes is also subject to the authority of the State Department to impose sanctions for non-criminal violations of the Arms Export Control Act. The possible criminal and/or civil sanctions could include fines as well as debarment from various export privileges and participating in government contracts. If Hughes were to enter into a settlement of this matter prior to the closing of the Boeing transaction that involves a debarment from sales to the U.S. government or a material suspension of Hughes' export licenses or other material limitation on projected business activities of the satellite systems manufacturing businesses, Boeing would not be obligated to complete the purchase of Hughes' satellite systems manufacturing businesses. Hughes does not expect the grand jury investigation or State Department review to result in a material adverse effect upon its business. However, there can be no assurance as to those conclusions. Hughes has contracts with ICO Global Communications (Operations), Ltd. to build the satellites and related components for ICO's global wireless communications system. ICO's parent company recently filed for bankruptcy protection under Chapter 11. If ICO's parent company is unable to confirm a plan of reorganization that provides for full payment to Hughes under these contracts, ICO may be unable to pay these amounts and the most likely outcome would be a liquidation proceeding. In the event that a liquidation becomes probable, Hughes would expect to record a pre-tax charge to income of up to approximately $350 million, of which $100 million would be attributable to continuing operations and $250 million would be attributable to discontinued operations. A portion of the purchase price to be paid by Boeing will be placed in escrow under certain circumstances if prior to completing this sale to Boeing, Hughes' contracts with ICO are not assumed by ICO with bankruptcy court approval or new similar contracts are not entered into with bankruptcy court approval. At December 31, 1999, minimum future commitments under noncancelable operating leases having lease terms in excess of one year are primarily for real property and aggregated $250.8 million, payable as follows: $102.8 million in 2000, $52.3 million in 2001, $24.2 million in 2002, $17.8 million in 2003, $12.5 million in 2004 and $41.2 million thereafter. Certain of these leases contain escalation clauses and renewal or purchase options. Rental expenses under operating leases, net of sublease rental income, were $58.5 million in 1999, $82.7 million in 1998 and $89.1 million in 1997. Hughes is contingently liable under standby letters of credit and bonds in the amount of $222.0 million at December 31, 1999. In Hughes' past experience, no material claims have been made against these financial instruments. In addition, at December 31, 1999, Hughes has guaranteed up to $209.1 million of bank debt, including $105.0 million related to American Mobile Satellite Corporation. Of the bank debt guaranteed, $105.0 million matures in March 2003; $55.4 million matures in September 2007; the remaining $48.7 million is due in variable amounts over the next five years. In connection with the direct-to-home broadcast businesses, Hughes has commitments related to certain programming agreements which are variable based upon the number of underlying subscribers and market penetration rates. Minimum payments over the terms of applicable contracts are anticipated to be about $1,000.0 million to $1,150.0 million. As part of a marketing agreement entered into with AOL on June 21, 1999, Hughes committed to increase its sales and marketing expenditures over the next three years by about $1.5 billion relating to DirecPC/AOL-Plus, DIRECTV, DIRECTV/AOL TV and DirecDuo. See Note 20 to the financial statements for further discussion of the above matters and various legal proceedings and claims that could be material, individually or in the aggregate, to Hughes' continuing operations or financial position. II-13 HUGHES ELECTRONICS CORPORATION Year 2000 A comprehensive, company-wide, Year 2000 program was initiated in 1996 to identify and remediate potential Year 2000 problems. The Year 2000 program was implemented in seven phases which included awareness, inventory, assessment, remediation, testing, implementation and contingency planning. Hughes incurred and expensed approximately $10.0 million during 1999, approximately $4.0 million during 1998 and approximately $1.0 million through 1997, related to the assessment of, and ongoing efforts in connection with, its Year 2000 program. Future spending for remaining system remediation and testing is currently estimated to be from $0.6 million to $1.0 million. As of the date of this report, Hughes has experienced no significant problems related to the Year 2000 conversion either domestically or in foreign locations. After extensive system verification and testing, all computerized information and process control systems are operating normally. The performance of critical customers and suppliers continues without notable change. Production and business activities are normal at all locations. Hughes also has not received any material complaints regarding any Year 2000 issues related to its products. However, Hughes cannot provide assurance that problems will not arise. Hughes continues to monitor the status of its operations, suppliers and distribution channels to ensure no significant business interruptions. In addition to the above, the satellite systems manufacturing businesses incurred expenditures related to the Year 2000 conversion of about $11.0 million and $5.0 million during 1999 and 1998, respectively. Future spending for the satellite systems manufacturing businesses is estimated at about $1.0 million. As of the date of this report, the satellite systems manufacturing businesses have experienced no significant problems related to the Year 2000 conversions, however, Hughes cannot provide assurance that problems will not arise. Each Hughes operating company is funding its respective Year 2000 efforts with current and future operating cash flows. Security Ratings On January 14, 2000, subsequent to the announced sale of Hughes' satellite systems manufacturing businesses to Boeing, Standard and Poor's Rating Services ("S&P") and Moody's Investors Service ("Moody's") each affirmed its respective debt ratings for Hughes. S&P maintained its BBB - minus credit rating, which indicates the issuer has adequate capacity to pay interest and repay principal. S&P maintained the short-term corporate credit and commercial paper ratings at A-3. S&P revised its outlook to positive from negative. Moody's confirmed Hughes' Baa2 long-term credit and P-2 commercial paper ratings. While the outlook remains negative, Moody's ended its review for possible downgrade. The Baa2 rating for senior debt indicates adequate likelihood of interest and principal payment and principal security. The P-2 commercial paper rating is the second highest rating available and indicates that the issuer has a strong ability for repayment relative to other issuers. Debt ratings by the various rating agencies reflect each agency's opinion of the ability of issuers to repay debt obligations as they come due. Lower ratings generally result in higher borrowing costs. A security rating is not a recommendation to buy, sell, or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating. Market Risk Disclosure The following discussion and the estimated amounts generated from the sensitivity analyses referred to below include forward-looking statements of market risk which assume for analytical purposes that certain adverse market conditions may occur. Actual future market conditions may differ materially from such assumptions because the amounts noted below are the result of analyses used for the purpose of assessing possible risks and the mitigation thereof. Accordingly, the forward-looking statements should not be considered projections by Hughes of future events or losses. General Hughes' cash flows and earnings are subject to fluctuations resulting from changes in foreign currency exchange rates, interest rates and changes in the market value of its equity investments. Hughes manages its exposure to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial instruments. Hughes' policy is to not enter into speculative derivative instruments for profit or execute derivative instrument contracts for which there are no underlying exposures. Hughes does not use financial instruments for trading purposes and is not a party to any leveraged derivatives. II-14 HUGHES ELECTRONICS CORPORATION Foreign Currency Risk Hughes generally conducts its business in U.S. dollars with a small amount of business conducted in a variety of foreign currencies and therefore is exposed to fluctuations in foreign currency exchange rates. Hughes' objective in managing the exposure to foreign currency changes is to reduce earnings and cash flow volatility associated with foreign exchange rate fluctuations. Accordingly, Hughes enters into foreign exchange-forward contracts to mitigate risks associated with future foreign currency firm commitments. Foreign exchange-forward contracts are legal agreements between two parties to purchase and sell a foreign currency, for a price specified at the contract date, with delivery and settlement in the future. At December 31, 1999, the impact of a hypothetical 10% adverse change in exchange rates on the fair values of foreign exchange-forward contracts and foreign currency denominated assets and liabilities would not be significant. Investments Hughes maintains investments in publicly-traded common stock of unaffiliated companies and is therefore subject to equity price risk. These investments are classified as available-for-sale and, consequently, are reflected in the balance sheets at fair value with unrealized gains or losses, net of taxes, recorded as part of accumulated other comprehensive income (loss), a separate component of stockholder's equity. At December 31, 1999, the fair values of the investments in such common stock were $1,025.2 million. The investments were valued at the market closing prices at December 31, 1999. No actions have been taken by Hughes to hedge this market risk exposure. A 10% decline in the market price of these investments would cause the fair value of the investments in common stock to decrease by $102.5 million as of December 31, 1999. Interest Rate Risk Hughes is subject to interest rate risk related to its $2.1 billion of debt outstanding at December 31, 1999. As of December 31, 1999, debt consisted of Hughes' $500.0 million floating rate line of credit and a $498.9 million floating rate note, PanAmSat's fixed-rate borrowings of $750.0 million, and various other floating and fixed rate borrowings. Hughes is subject to fluctuating interest rates which may adversely impact its results of operations and cash flows for its variable rate bank borrowings. Fluctuations in interest rates may also adversely effect the market value of Hughes' fixed-rate borrowings. At December 31, 1999, outstanding borrowings bore interest at rates ranging from 6.00% to 11.11%. The potential fair value loss resulting from a hypothetical 10% decrease in interest rates related to Hughes' outstanding debt would be approximately $29.0 million as of December 31, 1999. Credit Risk Hughes is exposed to credit risk in the event of non-performance by the counterparties to its foreign exchange-forward contracts. While Hughes believes this risk is remote, credit risk is managed through the periodic monitoring and approval of financially sound counterparties. II-15 HUGHES ELECTRONICS CORPORATION ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk The information required by this section is included in Item 7. II-16 HUGHES ELECTRONICS CORPORATION RESPONSIBILITIES FOR FINANCIAL STATEMENTS The following financial statements of Hughes Electronics Corporation (as more fully described in Note 1 to the financial statements) were prepared by management, which is responsible for their integrity and objectivity. The statements have been prepared in conformity with generally accepted accounting principles and, as such, include amounts based on judgments of management. Management is further responsible for maintaining internal control designed to provide reasonable assurance that the books and records reflect the transactions of the company and that established policies and procedures are carefully followed. Perhaps the most important feature in internal control is that it is continually reviewed for effectiveness and is augmented by written policies and guidelines, the careful selection and training of qualified personnel and a strong program of internal audit. Deloitte & Touche LLP, an independent auditing firm, is engaged to audit the financial statements of Hughes Electronics Corporation and issue reports thereon. The audit is conducted in accordance with generally accepted auditing standards that comprehend the consideration of internal control and tests of transactions to the extent necessary to form an independent opinion on the financial statements prepared by management. The Independent Auditors' Report appears on the next page. The Board of Directors, through its Audit Committee, is responsible for assuring that management fulfills its responsibilities in the preparation of the financial statements and engaging the independent auditors. The Audit Committee reviews the scope of the audits and the accounting principles being applied in financial reporting. The independent auditors, representatives of management, and the internal auditors meet regularly (separately and jointly) with the Audit Committee to review the activities of each, to ensure that each is properly discharging its responsibilities and to assess the effectiveness of internal control. It is management's conclusion that internal control at December 31, 1999 provides reasonable assurance that the books and records reflect the transactions of the company and that established policies and procedures are complied with. To ensure complete independence, Deloitte & Touche LLP has full and free access to meet with the Audit Committee, without management representatives present, to discuss the results of the audit, the adequacy of internal control, and the quality of financial reporting. /s/MICHAEL T. SMITH /s/ROXANNE S. AUSTIN Michael T. Smith Roxanne S. Austin Chairman of the Board and Senior Vice President and Chief Executive Officer Chief Financial Officer II-17 HUGHES ELECTRONICS CORPORATION INDEPENDENT AUDITORS' REPORT To the Board of Directors of Hughes Electronics Corporation: We have audited the accompanying Balance Sheets of Hughes Electronics Corporation (as more fully described in Note 1 to the financial statements) as of December 31, 1999 and 1998 and the related Statements of Operations and Available Separate Consolidated Net Income (Loss), Statements of Changes in Stockholder's Equity and Statements of Cash Flows for each of the three years in the period ended December 31, 1999. Our audits also included the financial statement schedule listed in Item 14. These financial statements and the financial statement schedule are the responsibility of Hughes Electronics Corporation's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Hughes Electronics Corporation at December 31, 1999 and 1998 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. Also, in our opinion, the financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As discussed in Note 2 to the accompanying financial statements, effective January 1, 1998, Hughes Electronics Corporation changed its method of accounting for costs of start-up activities by adopting American Institute of Certified Public Accountants Statement of Position 98-5, Reporting on the Costs of Start- Up Activities. /s/DELOITTE & TOUCHE LLP - ------------------------ DELOITTE & TOUCHE LLP Los Angeles, California January 19, 2000 (March 1, 2000 as to Note 21) II-18 HUGHES ELECTRONICS CORPORATION ITEM 8. Financial Statements and Supplementary Data STATEMENTS OF OPERATIONS AND AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS)
Years Ended December 31, --------------------------------- 1999 1998 1997 --------- --------- --------- (Dollars in Millions) Revenues Direct broadcast, leasing and other services $4,550.1 $2,640.2 $1,984.7 Product sales 1,010.2 840.4 853.6 -------- -------- -------- Total Revenues 5,560.3 3,480.6 2,838.3 -------- -------- -------- Operating Costs and Expenses Broadcast programming and other costs 2,075.1 1,211.4 912.3 Cost of products sold 954.6 606.6 538.4 Selling, general and administrative expenses 2,307.9 1,320.9 1,083.8 Depreciation and amortization 647.4 384.6 257.0 Amortization of GM purchase accounting adjustments 3.3 3.3 3.3 -------- -------- -------- Total Operating Costs and Expenses 5,988.3 3,526.8 2,794.8 -------- -------- -------- Operating Profit (Loss) (428.0) (46.2) 43.5 Interest income 27.0 112.3 33.0 Interest expense (122.7) (17.5) (91.0) Other, net (136.3) (151.8) 388.6 -------- -------- -------- Income (Loss) From Continuing Operations Before Income Taxes, Minority Interests, Extraordinary Item and Cumulative Effect of Accounting Change (660.0) (103.2) 374.1 Income tax provision (benefit) (236.9) (142.3) 162.0 Minority interests in net losses of subsidiaries 32.0 24.4 24.8 -------- -------- -------- Income (Loss) from continuing operations before extraordinary item and cumulative effect of accounting change (391.1) 63.5 236.9 Income from discontinued operations, net of taxes 99.8 196.4 170.6 Gain on sale of discontinued operations, net of taxes - - 62.8 -------- -------- -------- Income (Loss) before extraordinary item and cumulative effect of accounting change (291.3) 259.9 470.3 Extraordinary item, net of taxes - - (20.6) Cumulative effect of accounting change, net of taxes - (9.2) - -------- -------- -------- Net Income (Loss) (291.3) 250.7 449.7 Adjustments to exclude the effect of GM purchase accounting adjustments 21.0 21.0 21.0 -------- -------- -------- Earnings (Loss) excluding the effect of GM purchase accounting adjustments (270.3) 271.7 470.7 Preferred stock dividends (50.9) - - -------- -------- -------- Earnings (Loss) Used for Computation of Available Separate Consolidated Net Income (Loss) $ (321.2) $ 271.7 $ 470.7 ======== ======== ======== Available Separate Consolidated Net Income (Loss) Average number of shares of General Motors Class H Common Stock outstanding (in millions) (Numerator) 124.7 105.3 101.5 Average Class H dividend base (in millions) (Denominator) 418.5 399.9 399.9 Available Separate Consolidated Net Income (Loss) $ (95.7) $ 71.5 $ 119.4 ======== ======== ========
____________ Reference should be made to the Notes to Financial Statements. II-19 HUGHES ELECTRONICS CORPORATION BALANCE SHEETS
December 31, ----------------------- ASSETS 1999 1998 ---------- ---------- (Dollars in Millions) Current Assets Cash and cash equivalents $ 238.2 $ 1,342.0 Accounts and notes receivable, net of allowances of $92.9 and $23.9 960.9 764.6 Contracts in process 155.8 179.0 Inventories 236.1 286.6 Net assets of discontinued operations 1,224.6 1,005.8 Deferred income taxes 254.3 209.7 Prepaid expenses and other 788.1 287.5 --------- --------- Total Current Assets 3,858.0 4,075.2 Satellites, net 3,907.3 3,197.5 Property, net 1,223.0 683.0 Net Investment in Sales-type Leases 146.1 173.4 Intangible Assets, net 7,406.0 3,185.9 Investments and Other Assets 2,056.6 1,302.4 --------- --------- Total Assets $18,597.0 $12,617.4 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities Accounts payable $ 1,062.2 $ 691.8 Deferred revenues 130.5 43.8 Short-term borrowings and current portion of long-term debt 555.4 156.1 Accrued liabilities and other 894.0 454.3 --------- --------- Total Current Liabilities 2,642.1 1,346.0 --------- --------- Long-Term Debt 1,586.0 778.7 Other Liabilities and Deferred Credits 1,454.2 957.7 Deferred Income Taxes 689.1 641.1 Commitments and Contingencies Minority Interests 544.3 481.7 Stockholder's Equity Capital stock and additional paid-in capital 9,809.5 8,146.1 Preferred stock 1,487.5 - Retained earnings (deficit) (84.4) 257.8 --------- --------- Subtotal Stockholder's Equity 11,212.6 8,403.9 --------- --------- Accumulated Other Comprehensive Income (Loss) Minimum pension liability adjustment (7.3) (6.8) Accumulated unrealized gains on securities 466.0 16.1 Accumulated foreign currency translation adjustments 10.0 (1.0) --------- --------- Accumulated other comprehensive income 468.7 8.3 --------- --------- Total Stockholder's Equity 11,681.3 8,412.2 --------- --------- Total Liabilities and Stockholder's Equity $18,597.0 $12,617.4 ========= =========
____________ Reference should be made to the Notes to Financial Statements. II-20 HUGHES ELCTRONICS CORPORATION STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (Dollars in Millions)
Capital Stock Parent and Accumulated Company's Additional Retained Other Total Net Paid-In Preferred Earnings Comprehensive Stockholder's Comprehensive Investment Capital Stock (Deficit) Income (Loss) Equity Income ---------- ------- ----- --------- ------------- ------ ------ Balance at December 31, 1996 $ 2,497.0 $ (5.4) $ 2,491.6 Net contribution from Parent Company 1,124.2 1,124.2 Transfer of capital from Parent Company's net investment (4,063.8) $4,063.8 - Capital contribution resulting from the Hughes Transactions 4,259.0 4,259.0 Minimum pension liability adjustment resulting from the Hughes Transactions (6.3) (6.3) Unrealized gains on securities resulting from the Hughes Transactions 21.4 21.4 Net income 442.6 $ 7.1 449.7 $ 449.7 Foreign currency translation adjustments 0.6 0.6 0.6 ------- Comprehensive income $ 450.3 --------- -------- -------- ------- ------ --------- ======= Balance at December 31, 1997 - 8,322.8 - 7.1 10.3 8,340.2 Net Income 250.7 250.7 $ 250.7 Delco post-closing price adjustment (199.7) (199.7) Tax benefit from exercise of GM Class H common stock options 23.0 23.0 Minimum pension liability adjustment (0.5) (0.5) (0.5) Foreign currency translation adjustments 3.8 3.8 3.8 Unrealized gains on securities: Unrealized holding gains 1.8 1.8 1.8 Less: reclassification adjustment for gains included in net income (7.1) (7.1) (7.1) ------- Comprehensive income $ 248.7 --------- -------- -------- ------- ------ --------- ======= Balance at December 31, 1998 - 8,146.1 - 257.8 8.3 8,412.2 Net Loss (291.3) (291.3) $(291.3) Preferred stock $1,487.5 1,487.5 Preferred stock dividends (50.9) (50.9) Shares reacquired (11.1) (11.1) Stock options exercised 114.4 114.4 Shares issued in connection with acquisitions 1,506.7 1,506.7 Tax benefit from exercise of GM Class H common stock options 53.4 53.4 Minimum pension liability adjustment (0.5) (0.5) (0.5) Foreign currency translation adjustments 11.0 11.0 11.0 Unrealized gains on securities 449.9 449.9 449.9 ------- Comprehensive income $ 169.1 --------- -------- -------- ------- ------ --------- ======= Balance at December 31, 1999 $ - $9,809.5 $1,487.5 $ (84.4) $468.7 $11,681.3 ========= ======== ======== ======= ====== =========
- -------------------------- Reference should be made to the Notes to Financial Statements. * * * * * * * * * * * II-21 HUGHES ELECTRONICS CORPORATION STATEMENTS OF CASH FLOWS
Years Ended December 31, ------------------------------------ 1999 1998 1997 ---------- ---------- ---------- Cash Flows from Operating Activities (Dollars in Millions) Income (Loss) from continuing operations before extraordinary item and cumulative effect of accounting change $ (391.1) $ 63.5 $ 236.9 Adjustments to reconcile income (loss) from continuing operations before extraordinary item and cumulative effect of accounting change to net cash provided by operating activities Depreciation and amortization 650.7 387.9 260.3 Equity losses from unconsolidated affiliates 189.2 128.3 72.2 Amortization of gains on sale-leasebacks (10.8) (36.2) (42.9) Net gain on sale of investments and businesses sold (30.0) (13.7) (489.7) Gross profit on sales-type leases - - (33.6) Net loss on discontinuation of wireless product lines 272.1 - - Net loss on disposal of assets 2.7 - - Deferred income taxes and other 271.1 99.6 220.5 Change in other operating assets and liabilities Accounts and notes receivable 35.0 (49.4) (246.2) Contracts in process 23.2 1.7 (19.5) Inventories (38.7) 12.9 (39.9) Prepaid expenses and other (494.0) (91.6) (138.0) Collections of principal on net investment in sales-type leases 22.2 40.6 22.0 Accounts payable 101.4 224.0 (183.9) Deferred revenues (50.3) (34.0) (21.2) Accrued liabilities and other 59.6 (19.0) 207.3 Other (232.8) (102.5) 286.3 --------- --------- --------- Net Cash Provided by Operating Activities 379.5 612.1 90.6 --------- --------- --------- Cash Flows from Investing Activities Investment in companies, net of cash acquired (2,443.7) (1,231.0) (1,796.8) Investment in convertible bonds (244.7) - - Expenditures for property (506.4) (243.9) (137.4) Increase in satellites (789.4) (929.4) (633.5) Early buy-out of satellites under sale and leaseback (245.4) (155.5) - Proceeds from sale of discontinued operations - - 155.0 Proceeds from disposal of property 15.8 20.0 55.1 Proceeds from sale of investments - 12.4 242.0 Proceeds from insurance claims 272.0 398.9 - --------- --------- --------- Net Cash Used in Investing Activities (3,941.8) (2,128.5) (2,115.6) --------- --------- --------- Cash Flows from Financing Activities Net increase in notes and loans payable 343.0 - - Long-term debt borrowings 8,165.6 1,165.2 2,383.3 Repayment of long-term debt (7,494.4) (1,024.1) (2,851.9) Net proceeds from issuance of preferred stock 1,485.0 - - Stock options exercised 114.4 - - Purchase and retirement of GM Class H common stock (11.1) - - Preferred stock dividends paid to General Motors (25.0) - - Premium paid to retire debt - - (34.4) Contributions from Parent Company - - 1,124.2 Payment to General Motors for Delco post-closing price adjustment - (204.7) - Capital contribution resulting from Hughes Transactions - - 4,392.8 --------- --------- --------- Net Cash Provided by (Used in) Financing Activities 2,577.5 (63.6) 5,014.0 --------- --------- --------- Net cash provided by (used in) continuing operations (984.8) (1,580.0) 2,989.0 Net cash provided by (used in) discontinued operations (119.0) 138.3 (211.5) --------- --------- --------- Net increase (decrease) in cash and cash equivalents (1,103.8) (1,441.7) 2,777.5 Cash and cash equivalents at beginning of the year 1,342.0 2,783.7 6.2 --------- --------- --------- Cash and cash equivalents at end of the year $ 238.2 $ 1,342.0 $ 2,783.7 ========= ========= =========
- -------------------------- Reference should be made to the Notes to Financial Statements. II-22 HUGHES ELECTRONICS CORPORATION Note 1: Basis of Presentation and Description of Business On December 17, 1997, Hughes Electronics Corporation ("Hughes Electronics") and General Motors Corporation ("GM"), the parent of Hughes Electronics, completed a series of transactions (the "Hughes Transactions") designed to address strategic challenges facing the three principal businesses of Hughes Electronics and unlock stockholder value in GM. The Hughes Transactions included the tax-free spin-off of the defense electronics business ("Hughes Defense") to holders of GM $1-2/3 par value and Class H common stocks, the transfer of Delco Electronics Corporation ("Delco"), the automotive electronics business, to GM's Delphi Automotive Systems unit and the recapitalization of GM Class H common stock into a new tracking stock, GM Class H common stock, that is linked to the remaining telecommunications and space business. The Hughes Transactions were followed immediately by the merger of Hughes Defense with Raytheon Company ("Raytheon"). For the periods prior to the consummation of the Hughes Transactions on December 17, 1997, Hughes Electronics, consisting of its defense electronics, automotive electronics and telecommunications and space businesses, is hereinafter referred to as former Hughes or Parent Company. In connection with the recapitalization of Hughes Electronics on December 17, 1997, the telecommunications and space business of former Hughes, consisting principally of its direct-to-home broadcast, satellite services, satellite systems and network systems businesses, was contributed to the recapitalized Hughes Electronics. Such telecommunications and space business, both before and after the recapitalization, is hereinafter referred to as Hughes. The accompanying financial statements and footnotes pertain only to Hughes and do not include balances of former Hughes related to Hughes Defense or Delco. Prior to the Hughes Transactions, the Hughes businesses were effectively operated as divisions of former Hughes. For the period prior to December 18, 1997, these financial statements include allocations of corporate expenses from former Hughes, including research and development, general management, human resources, financial, legal, tax, quality, communications, marketing, international, employee benefits and other miscellaneous services. These costs and expenses have been charged to Hughes based either on usage or using allocation methodologies primarily based upon total revenues, certain tangible assets and payroll expenses. Management believes the allocations were made on a reasonable basis; however, they may not necessarily reflect the financial position, results of operations or cash flows of Hughes on a stand-alone basis in the future. Also, prior to December 18, 1997, interest expense in the Statements of Operations and Available Separate Consolidated Net Income (Loss) included an allocated share of total former Hughes' interest expense. Revenues, operating costs and expenses, and other non-operating results for discontinued operations are excluded from Hughes' results from continuing operations for all periods presented herein. The financial results of these businesses are presented in Hughes' Statements of Operations and Available Separate Consolidated Net Income (Loss) in a single line item entitled "income from discontinued operations, net of taxes," the related assets and liabilities are presented in the balance sheets on a single line item entitled "net assets of discontinued operations" and the net cash flows as "net cash provided by (used in) discontinued operations. See further discussion in Note 17. The accompanying financial statements include the applicable portion of intangible assets, including goodwill, and related amortization resulting from purchase accounting adjustments associated with GM's purchase of Hughes in 1985, with certain amounts allocated to the satellite systems manufacturing businesses. Hughes is a leading provider of digital entertainment, information and communication services and satellite-based private business networks. Hughes is the world's leading digital multi-channel entertainment service provider with its programming distribution service known as DIRECTV, which was introduced in the U.S. in 1994 and was the first high-powered, all digital, direct-to-home ("DTH") television distribution service in North America. DIRECTV began service in Latin America in 1996. Hughes is also the owner and operator of the largest commercial satellite fleet in the world through its 81% owned subsidiary, PanAmSat. Hughes is also a leading provider of satellite wireless communications ground equipment and business communications services. Its equipment and services are applied in, among other things, data, video and audio transmission, cable and network television distribution, private business networks, digital cellular communications and DTH satellite broadcast distribution of television programming. II-23 HUGHES ELECTRONICS CORPORATION Note 2: Summary of Significant Accounting Policies Principles of Combination and Consolidation Prior to December 18, 1997, the financial statements present, on a combined basis, the financial position, results of operations and cash flows of the telecommunications and space business owned and operated by former Hughes. Subsequent to the Hughes Transactions, the accompanying financial statements are presented on a consolidated basis. The financial statements include the accounts of Hughes and its domestic and foreign subsidiaries that are more than 50% owned or controlled by Hughes, with investments in associated companies in which Hughes owns at least 20% of the voting securities or has significant influence accounted for under the equity method of accounting. Use of Estimates in the Preparation of the Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts which differ from those estimates. Revenue Recognition Revenues are generated from sales of DTH broadcast subscriptions, and the sale of transponder capacity and related services through outright sales, sales-type leases and operating lease contracts, and sales of communications equipment and services. Sales are generally recognized as products are shipped or services are rendered. DTH subscription revenues are recognized when programming is viewed by subscribers. Programming payments received from subscribers in advance of viewing are recorded as deferred revenue until earned. Satellite transponder lease contracts qualifying for capital lease treatment (typically based on the term of the lease) are accounted for as sales-type leases, with revenues recognized equal to the net present value of the future minimum lease payments. Upon entering into a sales-type lease, the cost basis of the transponder is charged to cost of products sold. The portion of each periodic lease payment deemed to be attributable to interest income is recognized in each respective period. Contracts for sales of transponders typically include telemetry, tracking and control ("TT&C") service agreements. Revenues related to TT&C service agreements are recognized as the services are performed. Transponder and other lease contracts that do not qualify as sales-type leases are accounted for as operating leases. Operating lease revenues are recognized on a straight-line basis over the respective lease term. Differences between operating lease payments received and revenues recognized are deferred and included in accounts and notes receivable or investments and other assets. A small percentage of revenues are derived from long-term contracts for the sale of large wireless communications systems. Sales under long-term contracts are recognized primarily using the percentage-of-completion (cost-to-cost) method of accounting. Under this method, sales are recorded equivalent to costs incurred plus a portion of the profit expected to be realized, determined based on the ratio of costs incurred to estimated total costs at completion. Profits expected to be realized on long-term contracts are based on estimates of total sales value and costs at completion. These estimates are reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are recorded in the accounting period in which the revisions are made. Estimated losses on contracts are recorded in the period in which they are identified. Hughes has from time to time entered into agreements for the sale and leaseback of certain of its satellite transponders. However, as a result of early buy-out transactions described in Note 4, no obligations under sale- leaseback agreements remain at December 31, 1999. Prior to the completion of the early buy-out transactions, the leasebacks were classified as operating leases and, therefore, the capitalized cost and associated depreciation related to satellite transponders sold were not included in the accompanying financial statements. Gains resulting from the sale and leaseback transactions were deferred and amortized over the leaseback period. Leaseback expense was recorded using the straight-line method over the term of the lease, net of amortization of the deferred gains. Differences between operating leaseback payments made and expense recognized were deferred and included in other liabilities and deferred credits. Cash Flows Cash equivalents consist of highly liquid investments purchased with original maturities of 90 days or less. Net cash from operating activities includes cash payments made for interest of $174.6 million, $53.2 million and $156.8 million in 1999, 1998 and 1997, respectively. Net cash refunds received by Hughes for prior year income taxes amounted to $197.2 million and $59.9 million in 1999 and 1998, respectively. Cash payments for income taxes amounted to $24.0 million in 1997. Certain non-cash transactions occurred in connection with the consummation of the Hughes Transactions on December 17, 1997, resulting in a contribution of a net liability of $133.8 million. II-24 HUGHES ELECTRONICS CORPORATION Note 2: Summary of Significant Accounting Policies - Continued In 1997, in a separate non-cash transaction, Hughes' subsidiary, PanAmSat Corporation ("PanAmSat"), converted its outstanding preferred stock into debt amounting to $438.5 million. Contracts in Process Contracts in process are stated at costs incurred plus estimated profit, less amounts billed to customers and advances and progress payments applied. Engineering, tooling, manufacturing, and applicable overhead costs, including administrative, research and development and selling expenses, are charged to costs and expenses when incurred. Amounts billed under retainage provisions of contracts are not significant, and substantially all amounts are collectible within one year. Advances offset against contract related receivables amounted to $114.5 million and $112.0 million at December 31, 1999 and 1998, respectively. Inventories Inventories are stated at the lower of cost or market principally using the average cost method. Major Classes of Inventories
(Dollars in Millions) 1999 1998 ------ ------ Productive material and supplies $ 59.1 $ 55.0 Work in process 67.0 118.6 Finished goods 110.0 113.0 ------ ------ Total $236.1 $286.6 ====== ======
Property, Satellites and Depreciation Property and satellites are carried at cost. Satellite costs include construction costs, launch costs, launch insurance and capitalized interest. Capitalized satellite costs represent the costs of successful satellite launches. The proportionate cost of a satellite, net of depreciation and insurance proceeds, is written off in the period a full or partial loss of the satellite occurs. Depreciation is computed generally using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the life of the asset or term of the lease. Intangible Assets Goodwill, which represents the excess of the cost over the net tangible and identifiable intangible assets of acquired businesses, and intangible assets are amortized using the straight-line method over periods not exceeding 40 years. Software Development Costs Other assets include certain software development costs capitalized in accordance with Statement of Financial Accounting Standards ("SFAS") No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. Capitalized software development costs at December 31, 1999 and 1998, net of accumulated amortization of $98.7 million and $70.6 million, respectively, totaled $70.4 million and $104.1 million. The software is amortized using the greater of the units of revenue method or the straight-line method over its estimated useful life, not in excess of five years. Software program reviews are conducted to ensure that capitalized software development costs are properly treated and costs associated with programs that are not generating revenues are appropriately written off. Valuation of Long-Lived Assets Hughes periodically evaluates the carrying value of long-lived assets to be held and used, including goodwill and other intangible assets, when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost of disposal. II-25 HUGHES ELECTRONICS CORPORATION Note 2: Summary of Significant Accounting Policies - Continued Foreign Currency Substantially all of Hughes' foreign operations have determined the local currency to be their functional currency. Accordingly, these foreign entities translate assets and liabilities from their local currencies to U.S. dollars using year-end exchange rates while income and expense accounts are translated at the average rates in effect during the year. The resulting translation adjustment is recorded as part of accumulated other comprehensive income (loss), a separate component of stockholder's equity. Gains and losses resulting from remeasurement into the functional currency of transactions denominated in non- functional currencies are recognized in earnings. Net foreign currency transaction gains and losses included in operations were not material for all years presented. Financial Instruments and Investments Hughes maintains investments in equity securities of unaffiliated companies. These investments are considered available-for-sale and carried at current fair value with unrealized gains or losses, net of taxes, reported as part of accumulated other comprehensive income (loss), a separate component of stockholder's equity. Fair value is determined by market quotes, when available, or by management estimate. Market values of financial instruments, other than debt and derivative instruments, are based upon management estimates. Market values of debt and derivative instruments are determined by quotes from financial institutions. The carrying value of cash and cash equivalents, accounts and notes receivable, investments and other assets, accounts payable, amounts included in accrued liabilities and other meeting the definition of a financial instrument and debt approximated fair value at December 31, 1999. Hughes' derivative contracts primarily consist of foreign exchange-forward contracts. Hughes enters into these contracts to reduce its exposure to fluctuations in foreign exchange rates. Foreign exchange-forward contracts are accounted for as hedges to the extent they are designated as, and are effective as, hedges of firm foreign currency commitments. Gains and losses on foreign exchange-forward contracts designated as hedges of firm foreign currency commitments are recognized in income in the same period as gains and losses on the underlying transactions are recognized. Stock Compensation Hughes issues stock options to employees with grant prices equal to the fair value of the underlying security at the date of grant. No compensation cost has been recognized for options in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. See Note 12 for information regarding the pro forma effect on earnings of recognizing compensation cost based on the estimated fair value of the stock options granted, as required by SFAS No. 123, Accounting for Stock- Based Compensation. Compensation related to stock awards is recognized ratably over the vesting period and, where required, periodically adjusted to reflect changes in the stock price of the underlying security. Product and Service Related Expenses Advertising and research and development costs are expensed as incurred. Advertising expenses were $115.8 million in 1999, $130.0 million in 1998 and $74.2 million in 1997. Expenditures for research and development were $98.8 million in 1999, $92.6 million in 1998 and $81.9 million in 1997. Market Concentrations and Credit Risk Hughes provides services and extends credit to a number of wireless communications equipment customers and to a large number of DTH consumers. Management monitors its exposure to credit losses and maintains allowances for anticipated losses. Accounting Change In 1998, Hughes adopted American Institute of Certified Public Accountants Statement of Position ("SOP") 98-5, Reporting on the Costs of Start-Up Activities. SOP 98-5 requires that all start-up costs previously capitalized be written off and recognized as a cumulative effect of accounting change, net of taxes, as of the beginning of the year of adoption. On a prospective basis, these types of costs are required to be expensed as incurred. The unfavorable cumulative effect of this accounting change at January 1, 1998 was $9.2 million after-tax. II-26 HUGHES ELECTRONICS CORPORATION Note 2: Summary of Significant Accounting Policies - Concluded New Accounting Standards In September 1999, the Financial Accounting Standards Board ("FASB") issued Emerging Issues Task Force Issue 99-10 ("EITF 99-10"), Percentage Used to Determine the Amount of Equity Method Losses. EITF 99-10 addresses the percentage of ownership that should be used to compute equity method losses when the investment has been reduced to zero and the investor holds other securities of the investee. EITF 99-10 requires that equity method losses should not be recognized solely on the percentage of common stock owned; rather, an entity- wide approach should be adopted. Under such an approach, equity method losses must be recognized based on the ownership level that includes other equity securities (e.g., preferred stock) and loans/advances to the investee or based on the change in the investor's claim on the investee's book value. Hughes adopted EITF 99-10 during the third quarter of 1999 which resulted in Hughes recording a higher percentage of DIRECTV Japan's losses subsequent to the effective date of September 23, 1999. The unfavorable impact of adopting EITF 99-10 was $39.0 million after-tax. In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 , as amended, requires all derivatives to be recorded as either assets or liabilities and the instruments to be measured at fair value. Gains or losses resulting from changes in the values of those derivatives are to be recognized immediately or deferred depending on the use of the derivative and whether or not it qualifies as a hedge. Hughes will adopt SFAS No. 133 by January 1, 2001, as required. Hughes does not expect that the adoption of SFAS No. 133 will have a material impact on Hughes' results of operations or financial position. Reclassifications Certain reclassifications have been made to the prior year balances to conform to the 1999 presentation. Note 3: Property and Satellites, Net
Estimated Useful Lives (Dollars in Millions) (years) 1999 1998 ------------- -------- -------- Land and improvements 7 - 25 $ 51.4 $ 32.5 Buildings and leasehold improvements 2 - 30 197.0 136.3 Machinery and equipment 3 - 10 795.2 642.4 Equipment under operating lease 6 333.1 - Furniture, fixtures and office machines 3 - 13 92.3 67.7 Construction in progress - 363.4 206.6 -------- -------- Total 1,832.4 1,085.5 Less accumulated depreciation 609.4 402.5 -------- -------- Property, net $1,223.0 $ 683.0 ======== ======== Satellites 12 - 16 $4,683.1 $3,783.2 Less accumulated depreciation 775.8 585.7 -------- -------- Satellites, net $3,907.3 $3,197.5 ======== ========
Hughes capitalized interest of $65.1 million, $55.3 million and $64.5 million during 1999, 1998 and 1997, respectively, as part of the cost of its satellites under construction. Note 4: Leasing Activities Future minimum payments due from customers under sales-type leases and related service agreements, and noncancelable satellite transponder operating leases as of December 31, 1999 are as follows:
Sales-Type Leases -------------------- Minimum Service Lease Agreement (Dollars in Millions) Payments Payments Operating Leases - --------------------- -------- --------- ---------------- 2000 $ 42.0 $ 5.3 $ 702.0 2001 43.4 5.7 626.4 2002 43.4 5.7 575.0 2003 43.4 5.7 538.5 2004 39.7 5.2 503.1 Thereafter 37.1 5.2 1,911.3 ------ ----- -------- Total $249.0 $32.8 $4,856.3 ====== ===== ========
II-27 HUGHES ELECTRONICS CORPORATION Note 4: Leasing Activities - Concluded The components of the net investment in sales-type leases are as follows:
(Dollars in Millions) 1999 1998 ------ ------ Total minimum lease payments $249.0 $301.9 Less unearned interest income and allowance for doubtful accounts 81.1 106.0 ------ ------ Total net investment in sales-type leases 167.9 195.9 Less current portion 21.8 22.5 ------ ------ Total $146.1 $173.4 ====== ======
In 1996 and 1992, Hughes entered into sale-leaseback agreements for certain satellite transponders with other companies, including General Motors Acceptance Corporation ("GMAC"), a subsidiary of GM. Deferred gains from these sale- leaseback agreements are amortized over the expected term of the leaseback period. In 1998, PanAmSat exercised certain early buy-out options and repurchased a portion of the leased transponders for a total payment of $155.5 million. In 1999, PanAmSat exercised early buy-out options for the remaining transponders for $245.4 million in cash and $124.1 million of assumed debt. As a result of the above transactions, no deferred amounts remain outstanding at December 31, 1999. Note 5: Intangible Assets At December 31, 1999 and 1998, Hughes had $6,642.3 million and $3,184.6 million, respectively, of goodwill, net of accumulated amortization. Goodwill is amortized over 10 to 40 years. Hughes also had , net of accumulated amortization, $763.7 million and $1.3 million of intangible assets at December 31, 1999 and 1998, respectively, which are amortized over 2 to 40 years. Intangible assets consist mainly of FCC licenses, customer lists and dealer networks. Note 6: Investments Hughes has various investments that are accounted for under the equity method of accounting. Under the equity method of accounting, the investment is recorded at cost and adjusted for the appropriate share of the net earnings or losses of the investee. Investee losses are recorded up to the amount of the investment plus advances and loans made to the investee, and financial guarantees made on behalf of the investee. Aggregate investments in affiliated companies, including advances and loans, accounted for under the equity method at December 31, 1999 and 1998, amounted to $317.4 million and $57.1 million, respectively. Of these amounts, approximately $232.1 million and $55.9 million at December 31, 1999 and 1998, respectively, represent the investment in DIRECTV Japan, net of accumulated losses of $237.6 million and $102.7 million as of December 31, 1999 and 1998, respectively. Hughes' pre-tax share of losses of investees is disclosed in Note 13, Other Income and Expenses. Investments in marketable equity securities stated at current fair value and classified as available-for-sale totaled $1,025.2 million and $486.0 million at December 31, 1999 and 1998, respectively. Accumulated unrealized holding gains, net of taxes, recorded as part of accumulated other comprehensive income (loss), a separate component of stockholder's equity, were $466.0 million and $16.1 million as of December 31, 1999 and 1998, respectively. Note 7: Accrued Liabilities and other
(Dollars in Millions) 1999 1998 ------ ------ Payroll and other compensation $157.2 $ 93.5 Contract-related provisions 82.3 38.5 Provision for consumer finance and rebate programs 107.3 93.0 Programming contract liabilities 82.6 - Other 464.6 229.3 ------ ------ Total $894.0 $454.3 ====== ======
Included in other liabilities and deferred credits are long-term programming contract liabilities which totaled $627.1 million at December 31, 1999. Note 8: Short-Term Borrowings and Long-Term Debt Short-Term Borrowings In October 1999, Hughes issued $500.0 million ($498.9 million net of unamortized discount) of floating rate notes in a private placement with a group of institutional investors. The notes bear interest at a variable rate which was 7.45% at December 31, 1999. Interest is payable quarterly and the notes are due and payable on October 23, 2000. II-28 HUGHES ELECTRONICS CORPORATION Note 8: Short-Term Borrowings and Long-Term Debt - Concluded
Long-Term Debt Interest Rates at (Dollars in Millions) December 31, 1999 1999 1998 ------------------ -------- ------ Notes payable 6.00% - 6.875% $ 874.1 $750.0 Revolving credit facilities 6.77% - 7.10% 727.9 155.9 Other debt 11.69% - 12.29% 40.5 28.9 -------- ------ Total debt 1,642.5 934.8 Less current portion 56.5 156.1 -------- ------ Total long-term debt $1,586.0 $778.7 ======== ======
Notes payable. PanAmSat issued five, seven, ten and thirty-year notes totaling $750.0 million in January 1998. The outstanding principal balances and interest rates for the five, seven, ten and thirty-year notes as of December 31, 1999 were $200 million, $275 million, $150 million and $125 million, respectively. Principal on the notes is payable at maturity, while interest is payable semi- annually. In July 1999, in connection with the early buy-out of satellite sale- leasebacks, PanAmSat assumed $124.1 million of variable rate notes, all of which were outstanding at December 31, 1999. The notes mature on various dates through January 2, 2002. Revolving credit facilities. Hughes has three unsecured revolving credit facilities totaling $1.6 billion, consisting of a $750.0 million multi-year facility, a $350.0 million 364-day facility, and a $500.0 million bridge facility. The multi-year credit facility provides for a commitment of $750.0 million through December 5, 2002. The 364-day facility provides for a commitment of $350.0 million through November 22, 2000. These facilities also provide backup capacity for Hughes' commercial paper program. The bridge facility provides for a commitment of $500.0 million through the earlier of November 22, 2000 or the receipt of proceeds from the issuance of any debt securities of Hughes in a public offering. $500.0 million was outstanding under the multi-year facility at December 31, 1999. No amounts were outstanding under the commercial paper program, 364-day, or bridge facilities at December 31, 1999. Each of Hughes' credit facilities contain covenants that Hughes must comply with. The covenants require Hughes to maintain a minimum level of consolidated net worth and not to exceed certain specified ratios. At December 31, 1999, Hughes was in compliance with all such covenants. PanAmSat maintains a $500.0 million multi-year revolving credit facility that provides for short-term and long-term borrowings and a $500.0 million commercial paper program that provides for short-term borrowings. The multi-year revolving credit facility provides for a commitment through December 24, 2002. Borrowings under the credit facility and commercial paper program are limited to $500.0 million in the aggregate. No amounts were outstanding under either the multi- year revolving credit facility or the commercial paper program at December 31, 1999. At December 31, 1999, Hughes' 75% owned subsidiary, SurFin Ltd. ("SurFin"), had a total of $227.9 million outstanding under a $400.0 million unsecured revolving credit facility expiring in June 2002. Other. At December 31, 1999, Galaxy Latin America, LLC's ("GLA") 100% owned subsidiary, Galaxy Brasil, Ltda. ("GLB"), had a total of $24.3 million outstanding under variable rate notes payable in varying amounts at maturity in April and May 2002. Other long-term debt at December 31, 1999 and 1998 consisted primarily of notes that are payable at maturity in April 2007. As part of a debt refinancing program undertaken by PanAmSat in 1997, an extraordinary charge of $20.6 million ($34.4 million before taxes) was recorded that resulted from the excess of the price paid for the debt over its carrying value, net of deferred financing costs. Hughes has filed a shelf registration statement with the Securities and Exchange Commission with respect to an issuance of up to $2.0 billion of debt securities from time to time. No amounts have been issued as of December 31, 1999. The aggregate maturities of long-term debt for the five years subsequent to December 31, 1999 are $56.5 million in 2000, $21.2 million in 2001, $798.8 million in 2002, $200.0 million in 2003 and $566.0 million in 2005 and thereafter. Note 9: Income Taxes The provision for income taxes is based on reported income from continuing operations before income taxes, minority interests, extraordinary item and cumulative effect of accounting change. Deferred income tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes, as measured by applying currently enacted tax laws. Hughes and former Hughes (prior to December 18, 1997), and their domestic subsidiaries join with General Motors in filing a consolidated U.S. federal income tax return. The portion of the consolidated income tax liability or receivable recorded by Hughes is generally equivalent to the amount that would have been recorded on a separate return basis. Prior to December 18, 1997, income tax expense was allocated to Hughes as if Hughes filed a separate income tax return. II-29 HUGHES ELECTRONICS CORPORATION Note 9: Income Taxes - Continued The income tax provision (benefit) consisted of the following:
(Dollars in Millions) 1999 1998 1997 -------- -------- ------- Taxes currently payable (refundable): U.S. federal $(406.5) $(201.9) $(51.9) Foreign 30.1 15.9 9.5 State and local (24.2) (36.5) 7.7 ------- ------- ------ Total (400.6) (222.5) (34.7) ------- ------- ------ Deferred tax liabilities (assets): U.S. federal 185.0 50.8 181.9 State and local (21.3) 29.4 14.8 ------- ------- ------ Total 163.7 80.2 196.7 ------- ------- ------ Total income tax provision (benefit) $(236.9) $(142.3) $162.0 ======= ======= ======
Income (loss) from continuing operations before income taxes, minority interests, extraordinary item and cumulative effect of accounting change included the following components:
(Dollars in Millions) 1999 1998 1997 -------- -------- ------- U.S. income (loss) $(519.0) $ (10.2) $415.3 Foreign loss (141.0) (93.0) (41.2) ------- ------- ------ Total $(660.0) $(103.2) $374.1 ======= ======= ======
The combined income tax provision (benefit) was different than the amount computed using the U.S. federal statutory income tax rate for the reasons set forth in the following table:
(Dollars in Millions) 1999 1998 1997 -------- -------- ------- Expected tax (refund) at U.S. federal statutory income tax rate $(231.0) $ (36.1) $131.0 Research and experimentation tax benefits and resolution of tax contingencies (78.9) (172.9) (35.3) Foreign sales corporation tax benefit (13.6) (15.6) (13.0) U.S. state and local income taxes (29.5) (4.6) 14.6 Losses of equity method investees 60.3 36.7 25.3 Minority interests in losses of partnership 19.0 19.3 17.5 Non-deductible goodwill amortization 31.0 20.0 9.7 Other 5.8 10.9 12.2 ------- ------- ------ Total income tax provision (benefit) $(236.9) $(142.3) $162.0 ======= ======= ======
Temporary differences and carryforwards which gave rise to deferred tax assets and liabilities at December 31 were as follows:
1999 1998 ----------------------- ----------------------- Deferred Deferred Deferred Deferred Tax Tax Tax Tax (Dollars in Millions) Assets Liabilities Assets Liabilities --------- ----------- --------- ----------- Accruals and advances $ 106.1 $143.6 Sales and leasebacks - 65.4 Customer deposits, rebates and commissions 44.1 $ 114.1 52.9 State taxes 27.9 - 38.8 Gain on PanAmSat merger - 186.3 - $191.1 Satellite launch insurance costs - 136.8 - 103.1 Depreciation and amortization - 545.0 - 437.5 Net operating loss and tax credit carryforwards 287.3 - 77.8 - Programming contract liabilities 285.0 - - - Unrealized gains on securities - 318.6 - 1.2 Write-off related to wireless product lines 95.9 - - - Other 204.4 100.7 70.9 83.7 -------- -------- ------ ------ Subtotal 1,050.7 1,401.5 449.4 816.6 Valuation allowance (84.0) - (64.2) - -------- -------- ------ ------ Total deferred taxes $ 966.7 $1,401.5 $385.2 $816.6 ======== ======== ====== ======
II-30 HUGHES ELECTRONICS CORPORATION Note 9: Income Taxes - Concluded No income tax provision has been made for the portion of undistributed earnings of foreign subsidiaries deemed permanently reinvested that amounted to approximately $29.7 million and $18.5 million at December 31, 1999 and 1998, respectively. Repatriation of all accumulated earnings would have resulted in tax liabilities of $10.4 million in 1999 and $6.4 million in 1998. At December 31, 1999, Hughes has $84.0 million of deferred tax assets relating to foreign operating loss carryforwards expiring in varying amounts between 2000 and 2004. A valuation allowance was provided for all foreign operating loss carryforwards. At December 31, 1999, a Hughes subsidiary has $45.2 million of alternative minimum tax credits generated in separate filing years, which can be carried forward indefinitely. At December 31, 1999, Hughes' subsidiaries have $126.2 million of deferred tax assets relating to federal net operating loss carryforwards which will expire in varying amounts between 2009 and 2018. Hughes has $11.9 million of deferred tax assets relating to state net operating loss carryforwards which will expire in varying amounts between 2004 and 2018. Hughes also has $20 million of research and experimentation credits which will expire in 2019. Hughes has an agreement with Raytheon which governs Hughes' rights and obligations with respect to U.S. federal and state income taxes for all periods prior to the merger of Hughes Defense with Raytheon. Hughes is responsible for any income taxes pertaining to those periods prior to the merger, including any additional income taxes resulting from U.S. federal and state tax audits. Hughes is entitled to any U.S. federal and state income tax refunds relating to those years. The U.S. federal income tax returns of former Hughes have been examined through 1994. All years prior to 1986 are closed. Issues relating to the years 1986 through 1994 are being contested through various stages of administrative appeal. The Internal Revenue Service ("IRS") is currently examining former Hughes' U.S. federal tax returns for years 1995 through 1997. Management believes that adequate provision has been made for any adjustment which might be assessed for open years. Hughes reached an agreement with the IRS regarding a claim for refund of U.S. federal income taxes related to the treatment of research and experimentation costs for the years 1983 through 1995. Hughes recorded a total of $172.9 million of research and experimentation tax benefits during 1998, a substantial portion of which related to the above noted agreement with the IRS and covered prior years. Hughes has taxes receivable from GM at December 31, 1999 and 1998, respectively, of approximately $610.6 million and $379.3 million of which $290.8 million and $45.1 million, respectively, are included in prepaid expenses and other in the balance sheets. Note 10: Retirement Programs and Other Postretirement Benefits Substantially all of Hughes' employees participate in Hughes' contributory and non-contributory defined benefit retirement plans. Benefits are based on years of service and compensation earned during a specified period of time before retirement. Additionally, an unfunded, nonqualified pension plan covers certain employees. Hughes also maintains a program for eligible retirees to participate in health care and life insurance benefits generally until they reach age 65. Qualified employees who elected to participate in the Hughes contributory defined benefit pension plans may become eligible for these health care and life insurance benefits if they retire from Hughes between the ages of 55 and 65. Prior to December 18, 1997, the pension related assets and liabilities and the postretirement benefit plans were maintained by former Hughes for its non- automotive businesses and were not included in the Hughes balance sheet. A portion of former Hughes' net pension expense and postretirement benefit cost was allocated to Hughes and is included in the Statements of Operations and Available Separate Consolidated Net Income (Loss). For 1997, the pension expense and post retirement benefit cost components were not determined separately for the Hughes participants. The 1997 information presented below is based on pro rata allocations from former Hughes for each pension and postretirement benefit component. II-31 HUGHES ELECTRONICS CORPORATION Note 10: Retirement Programs and Other Postretirement Benefits - Continued The components of the pension benefit obligation and the other postretirement benefit obligation, as well as the net benefit obligation recognized in the balance sheets, are shown below:
Other Postretirement Pension Benefits Benefits ------------------ ------------------- (Dollars in Millions) 1999 1998 1999 1998 -------- ------- ------- --------- Change in Benefit Obligation Net benefit obligation at beginning of year $341.8 $316.4 $ 24.7 $ 19.5 Service cost 14.5 13.6 0.6 0.5 Interest cost 23.9 22.5 1.5 1.2 Plan participants' contributions 3.0 3.0 - - Actuarial (gain) loss (31.3) 17.1 (2.7) 5.1 Benefits paid (34.2) (30.8) (1.3) (1.6) ------ ------ ------ ------ Net benefit obligation at end of year 317.7 341.8 22.8 24.7 ------ ------ ------ ------ Change in Plan Assets Fair value of plan assets at beginning of year 346.6 337.0 - - Actual return on plan assets 69.6 30.3 - - Employer contributions 3.0 4.3 (1.3) (1.6) Plan participants' contributions 3.0 3.0 - - Benefits paid (34.2) (30.8) 1.3 1.6 Transfers 2.1 2.8 - - ------ ------ ------ ------ Fair value of plan assets at end of year 390.1 346.6 - - ------ ------ ------ ------ Funded status at end of year 72.4 4.8 (22.8) (24.7) Unamortized amount resulting from changes in plan provisions (0.4) 1.9 - - Unamortized net amount resulting from changes in plan experience and actuarial assumptions (38.7) 26.7 (1.4) 0.7 ------ ------ ------ ------ Net amount recognized at end of year $ 33.3 $ 33.4 $(24.2) $(24.0) ====== ====== ====== ====== Amounts recognized in the balance sheet consist of: Prepaid benefit cost $ 43.0 $ 42.0 Accrued benefit cost (24.6) (23.2) $(24.2) $(24.0) Intangible asset 2.6 3.2 - - Deferred tax assets 5.0 4.6 - - Accumulated other comprehensive loss 7.3 6.8 - - ------ ------ ------ ------ Net amount recognized at end of year $ 33.3 $ 33.4 $(24.2) $(24.0) ====== ====== ====== ======
Included in the pension plan assets at December 31, 1999 and 1998 are GM Class H common stock of $0.6 million and $0.4 million, GM $1-2/3 common stock of $0.3 million and $1.3 million and GMAC bonds of $0.5 million and $0.6 million, respectively. II-32 HUGHES ELECTRONICS CORPORATION Note 10: Retirement Programs and Other Postretirement Benefits - Concluded
Other Postretirement Weighted-average assumptions as of Pension Benefits Benefits December 31 ---------------- ---------------- 1999 1998 1999 1998 ------ ------ ------ ------ Discount rate 7.75% 6.75% 7.50% 6.50% Expected return on plan assets 9.50% 9.50% N/A N/A Rate of compensation increase 5.00% 5.00% N/A N/A
For measurement purposes, a 9.0% annual rate of increase per capita cost of covered health care benefits was assumed for 2000. The rate was assumed to decrease gradually 0.5% per year to 6.0% in 2006.
Other Postretirement Pension Benefits Benefits --------------------------- ------------------------ (Dollars in Millions) 1999 1998 1997 1999 1998 1997 ------ ------ ------ ------ ------ ------ Components of net periodic benefit cost Benefits earned during the year $ 14.5 $ 13.6 $ 11.4 $0.6 $ 0.5 $ 0.5 Interest accrued on benefits earned in prior years 23.9 22.5 22.4 1.5 1.2 1.2 Expected return on assets (28.5) (26.3) (24.7) - - - Amortization components Asset at date of adoption - (2.7) (3.0) - - - Amount resulting from changes in plan provisions 0.4 0.4 0.4 - - - Net amount resulting from changes in plan experience and actuarial assumptions 4.7 2.7 2.0 - (0.1) (0.2) ------ ------ ------ ---- ----- ----- Net periodic benefit cost $ 15.0 $ 10.2 $ 8.5 $2.1 $ 1.6 $ 1.5 ====== ====== ====== ==== ===== =====
The projected benefit obligation and accumulated benefit obligation for the pension plans with accumulated benefit obligations in excess of plan assets were $52.9 million and $42.4 million, respectively, as of December 31, 1999 and $49.8 million and $38.9 million, respectively, as of December 31, 1998. The pension plans with accumulated benefit obligations in excess of plan assets do not have any underlying assets. A one-percentage point change in assumed health care cost trend rates would have the following effects:
1-Percentage 1-Percentage (Dollars in Millions) Point Increase Point Decrease -------------- -------------- Effect on total of service and interest cost components $0.4 $(0.3) Effect on postretirement benefit obligation 3.2 (2.8)
Hughes maintains 401(k) plans for qualified employees. A portion of employee contributions are matched by Hughes and amounted to $12.5 million, $10.6 million and $9.6 million in 1999, 1998 and 1997, respectively. Hughes has disclosed certain amounts associated with estimated future postretirement benefits other than pensions and characterized such amounts as "other postretirement benefit obligation." Notwithstanding the recording of such amounts and the use of these terms, Hughes does not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of Hughes (other than pensions) represent legally enforceable liabilities of Hughes. Note 11: Stockholder's Equity In connection with the Hughes Transactions, Hughes was recapitalized on December 17, 1997 at which time 1,000 shares of $1.00 par value common stock, representing all of the authorized and outstanding common stock of Hughes, were issued to GM. Prior to December 17, 1997, the equity of Hughes was comprised of Parent Company's net investment in its telecommunications and space business. II-33 HUGHES ELECTRONICS CORPORATION Note 11: Stockholder's Equity - Concluded The following represents changes in the components of accumulated other comprehensive income (loss), net of taxes, as of December 31:
1999 1998 1997 ----------------------------- ----------------------------- -------------------------- Tax Tax Pre-tax (Credit) Net Pre-tax (Credit) Net Pre-tax Tax Net (Dollars in Millions) Amount Expense Amount Amount Expense Amount Amount Expense Amount -------- -------- ------- -------- -------- ------- ------- ------- ------ Minimum pension liability adjustments $ (0.8) $ (0.3) $ (0.5) $ (0.8) $(0.3) $(0.5) - - - Foreign currency translation adjustments $ 11.0 - $ 11.0 $ 3.8 - $ 3.8 $0.6 - $0.6 Unrealized gains on securities $767.3 $317.4 $449.9 $ 3.0 $ 1.2 $ 1.8 - - - Reclassification adjustment for gains included in net income - - - $(11.8) $(4.7) $(7.1) - - -
Note 12: Incentive Plans Under the Hughes Electronics Corporation Incentive Plan ("the Plan"), as approved by the GM Board of Directors in 1999, shares, rights or options to acquire up to 77.6 million shares of GM Class H common stock on a cumulative basis were available for grant through December 31, 1999. The GM Executive Compensation Committee may grant options and other rights to acquire shares of GM Class H common stock under the provisions of the Plan. The option price is equal to 100% of the fair market value of GM Class H common stock on the date the options are granted. These nonqualified options generally vest over two to four years, expire ten years from date of grant and are subject to earlier termination under certain conditions. As part of the Hughes Transactions, the outstanding options of former Hughes employees who continued as Hughes employees were converted on December 18, 1997 into options to purchase recapitalized GM Class H common stock. Recognition of compensation expense was not required in connection with the conversion. Changes in the status of outstanding options were as follows:
Shares Under Weighted-Average GM Class H Common Stock Option Exercise Price ------------ ---------------- Outstanding at December 31, 1997 13,961,615 $29.08 Granted 4,180,525 51.02 Exercised (1,506,241) 23.22 Terminated (937,179) 31.79 ---------- ------ Outstanding at December 31, 1998 15,698,720 $35.32 Granted 5,004,275 48.23 Exercised (3,436,057) 29.84 Terminated (1,431,582) 40.46 ---------- ------ Outstanding at December 31, 1999 15,835,356 $39.84 ========== ======
II-34 HUGHES ELECTRONICS CORPOATION Note 12: Incentive Plans - Concluded The following table summarizes information about the Plan stock options outstanding at December 31, 1999:
Options Outstanding Options Exercisable ------------------------------------------- ---------------------------- Weighted- Average Remaining Weighted- Weighted- Range of Number Contractual Average Number Average Exercise Prices Outstanding Life (years) Exercise Price Exercisable Exercise Price --------------- ----------- ------------ -------------- ----------- -------------- $9.86 to $20.00 326,686 2.9 $15.06 326,686 $ 15.06 20.01 to 30.00 663,549 4.9 22.24 663,549 22.24 30.01 to 40.00 6,634,506 7.1 31.74 3,842,272 32.01 40.01 to 50.00 5,573,775 9.0 46.37 17,712 47.63 50.01 to 85.72 2,636,840 8.5 55.78 1,031,719 54.79 --------------- ---------- --- ------ --------- ------- $9.86 to $85.72 15,835,356 7.8 $39.84 5,881,938 $ 33.59 ===== ====== ========== === ===== ========= =======
At December 31, 1999, 43.1 million shares were available for grant under the Plan subject to GM Executive Compensation Committee approval. On May 5, 1997, PanAmSat adopted a stock option incentive plan with terms similar to the Plan. As of December 31, 1999, PanAmSat had 3,455,832 options outstanding to purchase its common stock with exercise prices ranging from $29.00 per share to $59.75 per share. The options vest ratably over three to four years and have a remaining life ranging from seven years to nine years. At December 31, 1999, 439,420 options were exercisable at a weighted average exercise price of $36.46. The PanAmSat options have been considered in the following pro forma analysis. The following table presents pro forma information as if Hughes recorded compensation cost using the fair value of issued options on their grant date, as required by SFAS No. 123, Accounting for Stock Based Compensation:
(Dollars in Millions) 1999 1998 1997 -------- ------ ------ Earnings (loss) used for computation of available separate consolidated net income (loss) as reported $(321.2) $271.7 $470.7 pro forma (384.9) 186.7 427.2
The pro forma amounts for compensation cost are not indicative of the effects on operating results for future periods. For stock options granted prior to the Hughes Transactions, the estimated compensation cost was based upon an allocation from former Hughes which was calculated using the Black-Scholes valuation model for estimation of the fair value of its options. The following table presents the estimated weighted- average fair value of options granted and the assumptions used for the 1999, 1998 and 1997 calculations (for 1998 and 1997, stock volatility was estimated based upon a three-year average derived from a study of a Hughes determined peer group):
1999 1998 1997 -------- -------- ------- Estimated fair value per option granted $ 24.02 $ 22.78 $26.90 Average exercise price per option granted 48.23 51.02 31.71 Expected stock volatility 38.0% 32.8% 32.5% Risk-free interest rate 5.2% 5.6% 5.9% Expected option life (in years) 7.0 6.2 7.0
Note 13: Other Income and Expenses
(Dollars in Millions) 1999 1998 1997 ------- ------- ------ Equity losses from unconsolidated affiliates $(189.2) $(128.3) $(72.2) Gain on PanAmSat merger - - 489.7 Gain from sale of common stock of an affiliate 39.4 - - Other 13.5 (23.5) (28.9) ------- ------- ------ Total other, net $(136.3) $(151.8) $388.6 ======= ======= ======
II-35 HUGHES ELECTRONICS CORPORATION Note 13: Other Income and Expenses - Concluded Equity losses from unconsolidated affiliates at December 31, 1999 are primarily comprised of losses at DIRECTV Japan, of which Hughes owns 42.2%, Hughes Ispat Limited, of which Hughes owns 45%, Galaxy Entertainment de Venezuela, C.A., of which Hughes owns 20% and American Mobile Satellite Corporation ("AMSC"). During the third quarter of 1999, AMSC issued new shares of its common stock, resulting in Hughes recording an increase in its investment in AMSC of $50.2 million with an offsetting adjustment to other comprehensive income (loss), a separate component of stockholder's equity. The issuance of the new shares diluted Hughes' ownership in AMSC to 14%. Since Hughes no longer exerted significant influence over AMSC's operations, the accounting for the AMSC investment from the equity method to the cost basis of accounting. Note 14: Related-Party Transactions In the ordinary course of its operations, Hughes provides telecommunications services and sells electronic components to, and purchases sub-components from, related parties. The following table summarizes significant related-party transactions:
(Dollars in Millions) 1999 1998 1997 ----- ----- ----- Revenues $46.5 $40.5 $25.0 Costs and expenses Purchases 35.2 29.0 38.4 Allocation of corporate expenses - - 57.9 Allocated interest - - 31.6
Note 15: Available Separate Consolidated Net Income (Loss) Holders of GM Class H common stock have no direct rights in the equity or assets of Hughes, but rather have rights in the equity and assets of GM (which includes 100% of the stock of Hughes). Amounts available for the payment of dividends on GM Class H common stock are based on the Available Separate Consolidated Net Income (Loss) ("ASCNI") of Hughes. The ASCNI of Hughes is determined quarterly and is equal to the separate consolidated net income (loss) of Hughes, excluding the effects of GM purchase accounting adjustments arising from GM's acquisition of Hughes and including the effects of preferred dividends paid and/or payable to GM (earnings (loss) used for computation of ASCNI), multiplied by a fraction, the numerator of which is equal to the weighted-average number of shares of GM Class H common stock outstanding during the period (124.7 million, 105.3 million and 101.5 million during 1999, 1998 and 1997, respectively) and the denominator of which is a number equal to the weighted- average number of shares of GM Class H common stock which, if issued and outstanding, would represent 100% of the tracking stock interest in the earnings of Hughes (Average Class H dividend base). The Average Class H dividend base was 418.5 million during 1999 and 399.9 million during 1998 and 1997. Upon conversion of the GM Series H preference stock into GM Class H common stock, both the numerator and the denominator used in the computation of ASCNI will increase by the number of shares of the GM Class H common stock issued (see further discussion in Note 16). In addition, the denominator used in determining the ASCNI of Hughes may be adjusted from time to time as deemed appropriate by the GM Board of Directors ("GM Board") to reflect subdivisions or combinations of the GM Class H common stock, certain transfers of capital to or from Hughes, the contribution of shares of capital stock of GM to or for the benefit of Hughes employees and the retirement of GM Class H common stock purchased by Hughes. The GM Board's discretion to make such adjustments is limited by criteria set forth in GM's Restated Certificate of Incorporation. In connection with the PRIMESTAR and USSB transactions (see further discussion in Note 17), GM contributed to Hughes an amount of cash sufficient to enable Hughes to purchase from GM, for fair value as determined by the GM Board, the number of shares of GM Class H common stock delivered by Hughes. In accordance with the GM certificate of incorporation, the Class H dividend base was increased to reflect that number of shares. The number of shares issued as part of the PRIMESTAR acquisition and the USSB merger have been included in the calculation of both the numerator and denominator of the fraction described above since the consummation dates of the transactions. II-36 HUGHES ELECTRONICS CORPORATION Note 15: Available Separate Consolidated Net Income (Loss) - Concluded Effective January 1, 1999, shares of Class H common stock delivered by GM in connection with the award of such shares to and the exercise of stock options by employees of Hughes increases the numerator and denominator of the fraction referred to above. Prior to January 1, 1999, the exercise of stock options did not affect the GM Class H dividend base (denominator). From time to time, in anticipation of exercises of stock options, Hughes purchases Class H common stock on the open market. Upon purchase, these shares are retired and therefore decrease the numerator and denominator of the fraction referred to above. Dividends may be paid on the GM Class H common stock only when, as, and if declared by GM's Board of Directors in its sole discretion. Dividends may be paid on GM Class H common stock to the extent of the amount initially determined to be available for the payment of dividends on GM Class H common stock, plus the portion of earnings of GM after the closing of the Hughes Transactions attributed to GM Class H common stock. The GM Board determined that the amount initially available for the payment of dividends on shares of the recapitalized GM Class H common stock was the cumulative amount available for the payment of dividends on GM Class H common stock immediately prior to the closing of the Hughes Transactions, reduced by a pro rata portion of the net reduction in GM's total stockholder's equity resulting from the Hughes Transactions. As of December 31, 1999 , the amount available for the payment of dividends on GM Class H common stock was $5.4 billion . The GM Board does not currently intend to pay cash dividends on the recapitalized GM Class H common stock. Note 16: Hughes Series A Preferred Stock On June 24, 1999, as part of a strategic alliance with Hughes, America Online ("AOL") invested $1.5 billion in shares of GM Series H 6.25% Automatically Convertible Preference Stock ("GM Series H Preference Stock"). The GM Series H preference stock will automatically convert into GM Class H common stock in three years based upon a variable conversion factor linked to the GM Class H common stock price at the time of conversion, and accrues quarterly dividends at a rate of 6.25% per year. It may be converted earlier in certain limited circumstances. GM immediately invested the $1.5 billion received from AOL in shares of Hughes Series A Preferred Stock designed to correspond to the financial terms of the GM Series H preference stock. Dividends on the Hughes Series A Preferred Stock are payable to GM quarterly at an annual rate of 6.25%. These preferred stock dividends payable to GM will reduce Hughes' earnings used for computation of the ASCNI of Hughes, which will have an effect equivalent to the payment of dividends on the Series H preference stock as if those dividends were paid by Hughes. Upon conversion of the GM Series H preference stock into GM Class H common stock, Hughes will redeem the Series A Preferred Stock through a cash payment to GM equal to the fair market value of the GM Class H common stock issuable upon the conversion. Simultaneous with GM's receipt of the cash redemption proceeds, GM will make a capital contribution to Hughes of the same amount. In connection with this capital contribution, the denominator of the fraction used in the computation of the ASCNI of Hughes will be increased by the corresponding number of shares of GM Class H common stock issued. Accordingly, upon conversion of the GM Series H preference stock into GM Class H common stock, both the numerator and denominator used in the computation of ASCNI will increase by the amount of the GM Class H common stock issued. Note 17: Acquisitions, Investments and Divestitures Acquisitions and Investments In September and November of 1999, DIRECTV Japan, Hughes' 42.2% owned affiliate, raised a total of approximately $281 million through the issuance of bonds, convertible into common stock, to five of its major shareholders, including $244.7 million issued to Hughes. On July 28, 1999, GLA acquired GLB, the exclusive distributor of DIRECTV services in Brazil, from Tevecap S.A. for approximately $114.0 million plus the assumption of debt. In connection with the transaction, Tevecap also sold its 10% equity interest in GLA to Hughes and The Cisneros Group of Companies, the remaining GLA partners, which increased Hughes' ownership interest in GLA to 77.8%. As part of the transaction, Hughes also increased its ownership interest in SurFin from 59.1% to 75.0%. The total consideration paid in the transactions amounted to approximately $101.1 million. II-37 HUGHES ELECTRONICS CORPORATION Note 17: Acquisitions, Investments and Divestitures - Continued On May 20, 1999, Hughes acquired by merger all of the outstanding capital stock of U.S. Satellite Broadcasting Company ("USSB"), a provider of premium subscription television programming via the digital broadcasting system that it shares with DIRECTV. The total consideration of approximately $1.6 billion paid in July 1999, consisted of approximately $0.4 billion in cash and 22.6 million shares of Class H common stock. On April 28, 1999, Hughes completed the acquisition of PRIMESTAR's 2.3 million subscriber medium-power direct-to-home satellite business. The purchase price consisted of $1.1 billion in cash and 4.9 million shares of Class H common stock, for a total purchase price of $1.3 billion. As part of the agreement to acquire PRIMESTAR, Hughes agreed to purchase the high-power satellite assets and related orbital frequencies of Tempo Satellite Inc., a wholly-owned subsidiary of TCI Satellite Entertainment Inc. The purchase price for the Tempo Satellite assets consisted of $500 million in cash. Of this purchase price, $150 million was paid on March 10, 1999 for a satellite that has not yet been launched and the remaining $350 million was paid on June 4, 1999 for an in-orbit satellite and 11 related satellite orbital frequencies. Hughes agreed, in connection with its acquisition of PRIMESTAR, to exit the medium-power business prior to May 1, 2001. Hughes formulated a detailed exit plan during the second quarter of 1999 and immediately began to migrate the medium-power customers to DIRECTV's high-power platform. Accordingly, Hughes accrued exit costs of $150 million in determining the purchase price allocated to the net assets acquired. The principal components of such exit costs include penalties to terminate assumed contracts and costs to remove medium-power equipment from customer premises. The timing of subscriber migration and exit of the medium-power business is currently estimated to occur by the end of 2000, but is subject to change pending final management determination, which could result in an adjustment to the amount of accrued exit costs. The amount of accrued exit costs remaining at December 31, 1999 was $123.9 million. In February 1999, Hughes acquired an additional ownership interest in Grupo Galaxy Mexicana, S.R.L. de C.V. ("GGM"), a Latin America local operating company which is the exclusive distributor of DIRECTV in Mexico, from Grupo MVS, S.R.L. de C.V. Hughes' equity ownership represents 49.0% of the voting equity and all of the non-voting equity of GGM. In October 1998, Hughes acquired from Grupo MVS an additional 10.0% interest in GLA, increasing Hughes' ownership interest to 70.0%. Hughes also acquired an additional 19.8% interest in SurFin, a company providing financing of subscriber receiver equipment for certain local operating companies located in Latin America and Mexico, increasing Hughes' ownership percentage from 39.3% to 59.1%. The aggregate purchase price for these transactions was $197.0 million in cash. In May 1998, Hughes purchased an additional 9.5% interest in PanAmSat for $851.4 million in cash, increasing its ownership interest in PanAmSat to 81.0%. PanAmSat was originally acquired in May 1997, when Hughes and PanAmSat completed the merger of their respective satellite service operations into a new publicly- held company, which retained the name PanAmSat Corporation. Hughes contributed its Galaxy satellite services business in exchange for a 71.5% interest in the new company. Existing PanAmSat stockholders received a 28.5% interest in the new company and $1.5 billion in cash. Such cash consideration and other funds required to consummate the merger were funded by new debt financing totaling $1,725.0 million borrowed from GM, which was subsequently repaid in December 1997. The PanAmSat merger was treated as a partial sale of the Galaxy business by Hughes and resulted in a one-time pre-tax gain of $489.7 million ($318.3 million after-tax). The financial information included herein reflects the acquisitions discussed above from their respective dates of acquisition. The acquisitions were accounted for by the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets acquired and the liabilities assumed based on the estimated fair values at the date of acquisition. The excess of the purchase price over the estimated fair values of the net assets acquired has been recorded as goodwill, resulting in goodwill additions of $3,612.4 million and $702.9 million for the years ended December 31, 1999 and 1998, respectively. The December 31, 1999 financial statements reflect a preliminary allocation of the purchase price for the PRIMESTAR transaction based upon information currently available. Adjustments relating to the tangible assets, including equipment located on customer premises; intangible assets, including customer lists and dealer network; and accrued liabilities for programming contracts and leases with above-market rates are estimates pending the completion of independent appraisals currently in process. Additionally, the adjustment to recognize the benefit of net operating loss carryforwards of USSB represents a preliminary estimate pending further review and analysis by Hughes management. The foregoing appraisals, review and analysis are expected to be completed by March 31, 2000. Accordingly, the final purchase price allocations may be different from the amounts reflected herein. II-38 HUGHES ELECTRONICS CORPORATION Note 17: Acquisitions, Investments and Divestitures - Concluded The following selected unaudited pro forma information is being provided to present a summary of the combined results of Hughes and USSB and PRIMESTAR for 1999 and 1998 as if the acquisitions had occurred as of the beginning of the respective periods, giving effect to purchase accounting adjustments. The pro forma data presents only significant transactions, is presented for informational purposes only and may not necessarily reflect the results of operations of Hughes had these companies operated as part of Hughes for each of the periods presented, nor are they necessarily indicative of the results of future operations. The pro forma information excludes the effect of non- recurring charges.
(Dollars in Millions) 1999 1998 --------- -------- Total Revenues $6,350.3 $5,318.6 Income (loss) before extraordinary item and cumulative effect of accounting change (297.1) 160.0 Net income (loss) (297.1) 150.8 Pro forma available separate consolidated net Income (loss) (103.1) 53.4
Divestitures On January 13, 2000, Hughes announced that it had reached an agreement to sell its satellite systems manufacturing businesses to The Boeing Company ("Boeing") for $3.75 billion in cash. The final transaction, which is subject to regulatory approval, is expected to close in the second or third quarter of 2000. The financial results for the satellite systems manufacturing businesses are treated as discontinued operations for all periods presented herein. On December 15, 1997, Hughes sold substantially all of the assets and liabilities of the Hughes Avicom business to Rockwell Collins, Inc. for cash, which resulted in an after-tax gain of $62.8 million. Hughes Avicom is treated as a discontinued operation for all periods prior to its disposition. Summarized financial information for the discontinued operations follows:
(Dollars in Millions) 1999 1998 1997 -------- -------- -------- Revenues $1,780.4 $2,483.3 $2,392.5 Income tax provision 42.9 97.6 74.7 Net income 99.8 196.4 170.6
Hughes also announced on January 13, 2000, the discontinuation of its mobile cellular and narrowband local loop product lines at Hughes Network Systems. As a result of this decision, Hughes recorded a fourth quarter 1999 pre-tax charge to continuing operations of $272.1 million. The charge represents the write-off of receivables and inventories, licenses, software and equipment with no alternative use. Also, in December 1997, Hughes repurchased from AT&T for $161.8 million, a 2.5% equity interest in DIRECTV, ending AT&T's marketing agreement to distribute the DIRECTV direct broadcast satellite television service and DIRECTV/TM/ receiver equipment. Note 18: Derivative Financial Instruments and Risk Management In the normal course of business, Hughes enters into transactions that expose it to risks associated with foreign exchange rates. Hughes utilizes derivative instruments in an effort to mitigate these risks. Hughes' policy is to not enter into speculative derivative instruments for profit or execute derivative instrument contracts for which there are no underlying exposures. Instruments used as hedges must be effective at reducing the risk associated with the exposure being hedged and designated as a hedge at the inception of the contract. Accordingly, changes in market values of hedge instruments are highly correlated with changes in market values of the underlying transactions, both at the inception of the hedge and over the life of the hedge contract. Hughes primarily uses foreign exchange-forward contracts to hedge firm commitments denominated in foreign currencies. Foreign exchange-forward contracts are legal agreements between two parties to purchase and sell a foreign currency, for a price specified at the contract date, with delivery and settlement in the future. The total notional amounts of contracts afforded hedge accounting treatment at December 31, 1999 and 1998 were not significant. Hughes is exposed to credit risk in the event of non-performance by the counterparties to its foreign exchange-forward contracts. While Hughes believes this risk is remote, credit risk is managed through the periodic monitoring and approval of financially sound counterparties. II-39 HUGHES ELECTRONICS CORPORATION Note 19: Segment Reporting Hughes' segments, which are differentiated by their products and services, include Direct-To-Home Broadcast, Satellite Services, and Network Systems. Direct-To-Home Broadcast is engaged in acquiring, promoting, selling and/or distributing digital entertainment programming via satellite to residential and commercial customers. Satellite Services is engaged in the selling, leasing and operating of satellite transponders and providing services for cable television systems, news companies, Internet service providers and private business networks. Network Systems is engaged in manufacturing DIRECTV receiver equipment and providing satellite wireless communications ground equipment and business communications services. Other includes the corporate office and other entities. Selected information for Hughes' operating segments are reported as follows:
Direct-To- Home Satellite Network (Dollars in Millions) Broadcast Services Systems Other Eliminations Total - --------------------------- ----------- --------- --------- --------- ------------- ---------- 1999 External Revenues $3,781.7 $ 673.6 $1,091.7 $ 13.3 - $ 5,560.3 Intersegment Revenues 3.3 137.0 293.0 2.5 $(435.8) - -------- -------- -------- -------- ------- --------- Total Revenues $3,785.0 $ 810.6 $1,384.7 $ 15.8 $(435.8) $ 5,560.3 -------- -------- -------- -------- ------- --------- Operating Profit (Loss) $ (292.1) $ 338.3 $ (227.3) $ (143.8) $(103.1) $ (428.0) Depreciation and Amortization 312.0 280.5 49.2 20.8 (11.8) 650.7 Intangibles, net 4,308.5 2,368.6 46.9 682.0 - 7,406.0 Segment Assets 9,056.6 5,984.7 1,167.3 2,765.9 (377.5) 18,597.0 Capital Expenditures (1) 516.9 956.4 35.0 170.0 (13.0) 1,665.3 -------- -------- -------- -------- ------- --------- 1998 External Revenues $1,813.7 $ 643.8 $1,000.6 $ 22.5 - $ 3,480.6 Intersegment Revenues 2.4 123.5 76.1 1.4 $(203.4) - -------- -------- -------- -------- ------- --------- Total Revenues $1,816.1 $ 767.3 $1,076.7 $ 23.9 $(203.4) $ 3,480.6 -------- -------- -------- -------- ------- --------- Operating Profit (Loss) $ (228.1) $ 318.3 $ 10.9 $ (114.2) $ (33.1) $ (46.2) Depreciation and Amortization 102.3 235.0 41.7 13.9 (5.0) 387.9 Intangibles, net - 2,433.5 53.6 698.8 - 3,185.9 Segment Assets 2,190.4 5,890.5 1,299.0 3,470.6 (233.1) 12,617.4 Capital Expenditures (1) 230.8 921.7 40.0 3.3 133.0 1,328.8 -------- -------- -------- -------- ------- --------- 1997 External Revenues $1,276.9 $ 537.3 $ 998.3 $ 25.8 - $ 2,838.3 Intersegment Revenues - 92.6 13.0 2.7 $(108.3) - -------- -------- -------- -------- ------- --------- Total Revenues $1,276.9 $ 629.9 $1,011.3 $ 28.5 $(108.3) $ 2,838.3 -------- -------- -------- -------- ------- --------- Operating Profit (Loss) $ (254.6) $ 292.9 $ 74.1 $ (63.7) $ (5.2) $ 43.5 Depreciation and Amortization 86.1 145.2 32.0 - (3.0) 260.3 Intangibles, net - 2,498.5 - 63.6 - 2,562.1 Segment Assets 1,408.7 5,682.4 1,215.6 3,918.0 (83.2) 12,141.5 Capital Expenditures (1) 105.6 625.7 43.1 0.4 (62.1) 712.7 -------- -------- -------- -------- ------- ---------
(1) Includes expenditures related to satellites in segments as follows: $136.0 million and $70.2 million in 1999 and 1998, respectively, for Direct-To-Home Broadcast segment; $532.8 million, $726.3 million and $606.1 million in 1999, 1998 and 1997, respectively, for Satellite Services segment. Satellite Services segment also includes $369.5 million and $155.5 million in 1999 and 1998, respectively, related to the early buy-out of satellite sale- leasebacks. II-40 HUGHES ELECTRONICS CORPORATION Note 19: Segment Reporting - Concluded A reconciliation of operating profit (loss) to income (loss) from continuing operations before income taxes, minority interests, extraordinary item and cumulative effect of accounting change, as shown in the Statement of Operations and Available Separate Consolidated Net Income (Loss), follows:
(Dollars in Millions) 1999 1998 1997 -------- -------- ------- Operating profit (loss) $(428.0) $ (46.2) $ 43.5 Interest income 27.0 112.3 33.0 Interest expense (122.7) (17.5) (91.0) Other, net (136.3) (151.8) 388.6 ------ ------ ----- Income (loss) from continuing operations before income taxes, minority interests, extraordinary item and cumulative effect of accounting change $(660.0) $(103.2) $374.1 ======= ======= ======
The following table presents revenues earned from customers located in different geographic areas. Property is grouped by its physical location. All satellites are reported as United States assets.
1999 1998 1997 ----------------------- ----------------------- ----------------------- Net Net Net Total Total Property & Total Property & Total Property & (Dollars in Millions) Revenues Satellites Revenues Satellites Revenues Satellites ---------- ---------- ---------- ---------- ---------- ---------- North America United States $4,407.9 $4,891.8 $2,645.6 $3,830.6 $1,781.5 $3,178.6 Canada and Mexico 114.6 51.8 56.9 2.0 44.8 - -------- -------- -------- -------- -------- -------- Total North America 4,522.5 4,943.6 2,702.5 3,832.6 1,826.3 3,178.6 -------- -------- -------- -------- -------- -------- Europe United Kingdom 175.2 10.5 111.3 14.1 25.8 10.4 Other 47.6 0.2 61.2 0.3 121.7 0.1 -------- -------- -------- -------- -------- -------- Total Europe 222.8 10.7 172.5 14.4 147.5 10.5 -------- -------- -------- -------- -------- -------- Latin America Brazil 157.7 151.1 150.9 4.6 102.1 - Other 245.3 9.8 104.2 11.1 90.4 - -------- -------- -------- -------- -------- -------- Total Latin America 403.0 160.9 255.1 15.7 192.5 - -------- -------- -------- -------- -------- -------- Asia Japan 103.6 0.7 67.5 0.5 21.1 0.5 India 85.1 12.4 79.9 14.7 41.9 12.7 China 27.7 1.2 63.4 1.7 154.3 1.5 Other 108.5 0.5 65.5 0.6 359.9 0.4 -------- -------- -------- -------- -------- -------- Total Asia 324.9 14.8 276.3 17.5 577.2 15.1 -------- -------- -------- -------- -------- -------- Total Middle East 11.9 - 20.0 - 47.2 - Total Africa 75.2 0.3 54.2 0.3 47.6 - -------- -------- -------- -------- -------- -------- Total $5,560.3 $5,130.3 $3,480.6 $3,880.5 $2,838.3 $3,204.2 ======== ======== ======== ======== ======== ========
Note 20: Commitments and Contingencies In connection with the 1997 spin-off of the defense electronics business of Hughes' predecessor as part of the Hughes restructuring transactions and the subsequent merger of that business with Raytheon Company, the terms of the merger agreement provided processes for resolving disputes that might arise in connection with post-closing financial adjustments that were also called for by the terms of the merger agreement. These financial adjustments might require a cash payment from Raytheon to Hughes or vice versa. II-41 HUGHES ELECTRONICS CORPORATION Note 20: Commitments and Contingencies - Continued A dispute currently exists regarding the post-closing adjustments which Hughes and Raytheon have proposed to one another and related issues regarding the adequacy of disclosures made by Hughes to Raytheon in the period prior to consummation of the merger. Hughes and Raytheon are proceeding with the dispute resolution process. It is possible that the ultimate resolution of the post- closing financial adjustment and of related disclosure issues may result in Hughes making a payment to Raytheon that would be material to Hughes. However, the amount of any payment that either party might be required to make to the other cannot be determined at this time. Hughes intends to vigorously pursue resolution of the disputes through the arbitration processes, opposing the adjustments proposed by Raytheon, and seeking the payment from Raytheon that Hughes has proposed. On June 3, 1999, the National Rural Telecommunications Cooperative ("NRTC") filed a lawsuit against DIRECTV, Inc. and Hughes Communications Galaxy, Inc., which Hughes refers to together in this description as `` DIRECTV'', in the U.S. District Court for the Central District of California, alleging that DIRECTV has breached the DBS Distribution Agreement with the NRTC. The DBS Distribution Agreement provides the NRTC with certain rights, in certain specified portions of the United States, with respect to DIRECTV programming delivered over 27 of the 32 frequencies at the 101 (degrees) west longitude orbital location. The NRTC claims that DIRECTV has wrongfully deprived it of the exclusive right to distribute programming formerly provided by USSB over the other five frequencies at 101 (degrees). DIRECTV denies that the NRTC is entitled to exclusive distribution rights to the former USSB programming because, among other things, the NRTC's exclusive distribution rights are limited to programming distributed over 27 of the 32 frequencies at 101 (degrees). The NRTC's complaint seeks, in the alternative, the right to distribute former USSB programming on a non- exclusive basis and the recovery of related revenues from the date USSB was acquired by Hughes. DIRECTV maintains that the NRTC's right under the DBS Distribution Agreement is to market and sell the former USSB programming as its agent and the NRTC is not entitled to the claimed revenues. DIRECTV intends to vigorously defend against the NRTC claims. DIRECTV has also filed a counterclaim against the NRTC seeking a declaration of the parties' rights under the DBS Distribution Agreement. On August 26, 1999, the NRTC filed a second lawsuit against DIRECTV alleging that DIRECTV has breached the DBS Distribution Agreement. In this lawsuit, the NRTC is asking the court to require DIRECTV to pay the NRTC a proportionate share of unspecified financial benefits that DIRECTV derives from programming providers and other third parties. DIRECTV denies that it owes any sums to the NRTC on account of the allegations in these matters and plans to vigorously defend itself against these claims. Pegasus Satellite Television, Inc. and Golden Sky Systems, Inc., the two largest NRTC affiliates, filed an action on January 11, 2000 against DIRECTV in the U.S. District Court in Los Angeles. The plaintiffs allege, among other things, that DIRECTV has interfered with their contractual relationship with the NRTC. The plaintiffs plead that their rights and damages are derivative of the rights and claims asserted by the NRTC in its two cases against DIRECTV. The plaintiffs also allege that DIRECTV has interfered with their contractual relationships with manufacturers and distributors by preventing those parties from selling receiving equipment to the plaintiffs' dealers. DIRECTV denies that it has wrongfully interfered with any of plaintiffs' business relationships and will vigorously defend the lawsuit. Although an amount of loss, if any, cannot be estimated at this time, an unfavorable outcome could be reached in the NRTC and Pegasus litigation that could be material to Hughes' results of operations or financial position. General Electric Capital Corporation ("GECC") and DIRECTV, Inc. entered into a contract on July 31, 1995, in which GECC agreed to establish and manage a private label consumer credit program for consumer purchases of hardware and related DIRECTV programming. Under the contract, GECC also agreed to provide certain related services to DIRECTV, including credit risk scoring, billing and collections services. DIRECTV agreed to act as a surety for loans complying with the terms of the contract. Hughes guaranteed DIRECTV's performance under the contract. A complaint and counterclaim have been filed by the parties in the U.S. District Court for the District of Connecticut concerning GECC's performance and DIRECTV's obligation to act as a surety. GECC claims damages from DIRECTV in excess of $140 million. DIRECTV is seeking damages from GECC in excess of $45 million. Hughes intends to vigorously contest GECC's allegations and pursue its own contractual rights and remedies. Hughes does not believe that the litigation will have a material adverse impact on its results of operations or financial position. Pretrial discovery is completed. No specific trial date has been set, but a trial may be held in 2000. II-42 HUGHES ELECTRONICS CORPORATION Note 20: Commitments and Contingencies - Concluded There is a pending grand jury investigation into whether Hughes should be accused of criminal violations of the export control laws arising out of the participation of two of its employees on a committee formed to review the findings of Chinese engineers regarding the failure of a Long March rocket in China in 1996. Hughes is also subject to the authority of the State Department to impose sanctions for non-criminal violations of the Arms Export Control Act. The possible criminal and/or civil sanctions could include fines as well as debarment from various export privileges and participating in government contracts. If Hughes were to enter into a settlement of this matter prior to the closing of the Boeing transaction that involves a debarment from sales to the U.S. government or a material suspension of Hughes' export licenses or other material limitation on projected business activities of the satellite systems manufacturing businesses, Boeing would not be obligated to complete the purchase of Hughes' satellite systems manufacturing businesses. Hughes does not expect the grand jury investigation or State Department review to result in a material adverse effect upon its business. Hughes Space and Communications International, a wholly owned subsidiary of Hughes Space and Communications Company, has certain contracts with ICO Global Communications Operations to build the satellites and related components for a global wireless communications system. Hughes owns approximately 2.6% of the equity in ICO's parent company (which Hughes has agreed to sell to Boeing as part of the sale of Hughes' satellite systems manufacturing businesses). On August 27, 1999, the ICO parent company filed for bankruptcy protection under Chapter 11 in U.S. Bankruptcy Court in Wilmington, Delaware. On December 3, 1999, the U.S. Bankruptcy Court in this case granted final approval of debtor- in-possession financing in the amount of $500 million to a group led by Craig McCaw, the Chairman of Teledesic LLC, a company establishing a global broadband Internet-in-the-Sky satellite communications network. In October 1999, McCaw and his group also agreed to provide an additional $700 million in financing upon the ICO parent's emergence from bankruptcy court protection, to the extent that this financing is not provided by other investors. This exit financing is expected to be completed in mid-2000, upon court approval and consummation of the ICO parent company reorganization plan. There can be no assurance when the consummation of the reorganization plan will occur or if the ICO parent company will be successful in confirming any plan of reorganization. If it is unable to do so the most likely outcome would be a liquidation proceeding. In the event that a liquidation becomes probable, Hughes would expect to record a pre-tax charge to income of up to approximately $350 million, of which $100 million would be attributable to continuing operations and $250 million would be attributable to discontinued operations. A portion of the purchase price to be paid by Boeing will be placed in escrow under certain circumstances if prior to completing this sale to Boeing, Hughes' contracts with ICO are not assumed by ICO with bankruptcy court approval or new similar contracts are not entered into with bankruptcy court approval. At December 31, 1999, minimum future commitments under noncancelable operating leases having lease terms in excess of one year are primarily for real property and aggregated $250.8 million, payable as follows: $102.8 million in 2000, $52.3 million in 2001, $24.2 million in 2002, $17.8 million in 2003, $12.5 million in 2004 and $41.2 million thereafter. Certain of these leases contain escalation clauses and renewal or purchase options. Rental expenses under operating leases, net of sublease rental income, were $58.5 million in 1999, $82.7 million in 1998 and $89.1 million in 1997. Hughes is contingently liable under standby letters of credit and bonds in the amount of $222.0 million at December 31, 1999. In Hughes' past experience, no material claims have been made against these financial instruments. In addition, at December 31, 1999 Hughes has guaranteed up to $209.1 million of bank debt, including $105.0 million related to American Mobile Satellite Corporation. Of the bank debt guaranteed, $105.0 million matures in March 2003; $55.4 million matures in September 2007; the remaining $48.7 million is due in variable amounts over the next five years. In connection with the DTH broadcast businesses, Hughes has commitments related to certain programming agreements which are variable based upon the number of underlying subscribers and market penetration rates. Minimum payments over the terms of applicable contracts are anticipated to be approximately $1,000.0 million to $1,150.0 million. As part of a marketing agreement entered into with AOL on June 21, 1999, Hughes committed to increase its sales and marketing expenditures over the next three years by approximately $1.5 billion relating to DirecPC/AOL-Plus, DIRECTV, DIRECTV/AOL TV and DirecDuo. Hughes is subject to various claims and legal actions which are pending or may be asserted against it. The aggregate ultimate liability of Hughes under these claims and actions was not determinable at December 31, 1999. In the opinion of Hughes management, such liability is not expected to have a material adverse effect on Hughes' results of operations or financial position. II-43 HUGHES ELECTRONICS CORPORATION Note 21: Subsequent Events On March 1, 2000, Hughes announced that DIRECTV Japan's operations will be discontinued and that its subscribers would migrate to SkyPerfecTV, a company in Japan providing direct-to-home satellite broadcasting. As a result of this transaction, Hughes will acquire a 6.8% interest in SkyPerfecTV, which is expected to complete an IPO during its fiscal year ending March 31, 2001. Hughes will be required to fund a substantial portion of the costs to be incurred over the next six to nine months to exit the DIRECTV Japan business. Hughes will accrue such exit costs during the first quarter of fiscal 2000. The first quarter charge will be offset by the fair value of the SkyPerfecTV interest received; however the amounts are not yet estimable. In addition, Hughes will continue to record its share of DIRECTV Japan's operating losses during fiscal 2000. EchoStar Communications Corporation and others commenced an action in the U.S. District Court in Colorado on February 1, 2000 against DIRECTV, Hughes Network Systems and Thomson Consumer Electronics, Inc. seeking, among other things, injunctive relief and unspecified damages, including treble damages, in connection with allegations that the defendants have entered into agreements with retailers and program providers and engaged in other conduct that violates the antitrust laws and constitutes unfair competition. DIRECTV believes that the complaint is without merit and intends to vigorously defend against the allegations raised. Although an amount of loss, if any, cannot be estimated at this time, an unfavorable outcome could be reached that could be material to Hughes' results of operations or financial position. * * * II-44 HUGHES ELECTRONICS CORPORATION SUPPLEMENTAL INFORMATION
Selected Quarterly Data (Unaudited) 1st 2nd 3rd 4th - ------------------------------------------------------------------------------------------------- (Dollars in Millions) 1999 Quarters - ------------- Revenues $918.4 $1,316.1 $1,627.8 $1,698.0 ------ -------- -------- -------- Loss from continuing operations before income taxes and minority interests $(31.0) $ (70.8) $ (87.4) $ (470.8) Income tax benefit (13.4) (9.5) (36.8) (177.2) Minority interests in net losses of subsidiaries 6.5 6.8 8.8 9.9 Income from discontinued operations 84.1 (43.1) 6.9 51.9 ------ -------- -------- -------- Net income (loss) 73.0 (97.6) (34.9) (231.8) Earnings (Loss) used for computation of available separate consolidated net income (loss) $ 78.3 $ (93.9) $ (54.3) $ (251.3) ====== ======== ======== ======== Average number of shares of General Motors Class H common stock outstanding (in millions) 106.3 121.0 135.1 136.3 Average Class H dividend base (in millions) 400.2 414.9 428.9 430.1 Available separate consolidated net income (loss) $ 20.8 $ (27.4) $ (17.1) $ (79.6) Stock price range of General Motors Class H common stock High $53.00 $ 63.88 $ 62.44 $ 97.63 Low $38.50 $ 48.94 $ 48.75 $ 55.94
II-45 HUGHES ELECTRONICS CORPORATION SUPPLEMENTAL INFORMATION
Selected Quarterly Data (Unaudited) - Concluded 1st 2nd 3rd 4th - -------------------------------------------------------------------------------------------- (Dollars in Millions) 1998 Quarters - ------------- Revenues $739.7 $780.5 $855.2 $1,105.2 ------ ------ ------ -------- Income (Loss) from continuing operations before income taxes, minority interests and cumulative effect of accounting change $ 19.9 $(26.3) $(19.8) $ (77.0) Income tax provision (benefit) 12.9 (8.5) (3.7) (143.0) Minority interests in net losses of subsidiaries 1.3 8.6 9.3 5.2 Income from discontinued operations 40.1 60.0 44.4 51.9 Cumulative effect of accounting change (1) (9.2) - - - ------ ------ ------ -------- Net income 39.2 50.8 37.6 123.1 Earnings used for computation of available separate consolidated net income $ 44.5 $ 56.1 $ 42.9 $ 128.2 ====== ====== ====== ======== Average number of shares of General Motors Class H common stock outstanding (in millions) 104.1 105.2 105.7 105.9 Average Class H dividend base (in millions) 399.9 399.9 399.9 399.9 Available separate consolidated net income $ 11.5 $ 14.7 $ 11.4 $ 33.9 Stock price range of General Motors Class H common stock High $48.00 $57.88 $50.81 $ 42.38 Low $31.50 $42.75 $35.00 $ 30.38
- -------------- (1) Hughes adopted SOP 98-5, Reporting on the Costs of Start-Up Activities, effective January 1, 1998. The unfavorable cumulative effect of adopting SOP 98-5 was $9.2 million. The impact on the second, third and fourth quarters of 1998 was not significant. II-46 HUGHES ELECTRONICS CORPORATION ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. II-47 HUGHES ELECTRONICS CORPORATION PART III ITEM 10. Directors and Executive Officers of the Registrant Omitted. ITEM 11. Executive Compensation Omitted. ITEM 12. Security Ownership of Certain Beneficial Owners and Management Omitted. ITEM 13. Certain Relationships and Related Transactions Omitted. III-1 HUGHES ELECTRONICS CORPORATION PART IV ITEM 14. Exhibits, Financial Statement Schedule, and Reports on Forms 8-K
Page Number (a) 1. All Financial Statements See Part II 2. Financial Statement Schedule II - Valuation and Qualifying Accounts for the Years Ended December 31, 1999, 1998, and 1997 IV-6 3. Exhibits (Including Those Incorporated by Reference) Exhibit Number - ------ *2.1 Agreement and Plan of Merger among General Motors Corporation, Hughes Electronics Corporation and United States Satellite Broadcasting Company, Inc. dated December 11, 1998 (incorporated by reference to Exhibit 2(a) to the Current Report on Form 8-K of General Motors Corporation filed December 17, 1998 (the "December 8-K")). *2.2 Shareholders Agreement dated December 11, 1998 among General Motors Corporation, Hughes Electronics Corporation, Hubbard Broadcasting, Inc., Stanley S. Hubbard, Stanley E. Hubbard and Robert W. Hubbard (incorporated by reference to Exhibit 2(b) to the December 8-K). *2.3 Asset Purchase Agreement among PRIMESTAR, Inc., PRIMESTAR Partners L.P., PRIMESTAR MDU, Inc., the stockholders of PRIMESTAR, Inc. and Hughes Electronics Corporation, dated as of January 22, 1999 (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K of General Motors Corporation filed February 2, 1999 (the "February 8-K")). *2.4 Asset Purchase Agreement among PRIMESTAR, Inc., PRIMESTAR Partners L.P., Tempo Satellite, Inc., the stockholders of PRIMESTAR, Inc. and Hughes Electronics Corporation, dated as of January 22, 1999 (incorporated by reference to Exhibit 99.2 to the February 8-K). **2.5 Stock Purchase Agreement between The Boeing Company, Hughes Electronics Corporation and Hughes Telecommunications and Space Company for the purchase and sale of the outstanding capital stock of Hughes Space and Communications Company and certain additional outstanding capital stock, dated as of January 13, 2000. *3.1 Amended and Restated Certificate of Incorporation of Hughes Electronics Corporation (incorporated by reference to Exhibit 3.1 to the Form 10 of Hughes Electronics Corporation filed August 13, 1999 (the "Form 10"). *3.2 Bylaws of Hughes Electronics Corporation (incorporated by reference to Exhibit 3.2 to the Form 10). *4.1 Specimen form of certificate representing Common Stock of Hughes Electronics Corporation (incorporated by reference to Exhibit 4.1 to the Form 10). **4.2 Indenture by and between Hughes Electronics Corporation and The Bank of New York, as Trustee, dated October 22, 1999. **4.3 Form of Floating Rate Note (included in Exhibit 4.2). *10.1 Revolving Credit Agreement (364-day Facility), dated as of December 5, 1997 among Hughes Network Systems, Inc. to be renamed Hughes Electronics Corporation, the Banks named therein and Bank of America National Trust and Savings Association as Administrative Agent, Morgan Guaranty Trust Company of New York, as Syndication Agent, Citicorp USA, Inc. and The Chase Manhattan Bank as Documentation Agents (the "364-day Facility") (incorporated by reference to Exhibit 10.1 to the Form 10). *10.2 First Amendment to the 364-day Facility, dated as of December 3, 1998 (incorporated by reference to Exhibit 10.2 to the Form 10).
IV-1 HUGHES ELECTRONICS CORPORATION PART IV - Continued ITEM 14. Exhibits, Financial Statement Schedule, and Reports on Forms 8-K (continued)
Exhibit Page Number Number - ------ ------ *10.3 Revolving Credit Agreement (Multi-Year Facility), dated as of December 5, 1997 among Hughes Network Systems, Inc. to be renamed Hughes Electronics Corporation, the Banks named therein and Bank of America National Trust and Savings Association as Administrative Agent, Morgan Guaranty Trust Company of New York, as Syndication Agent, Citicorp USA, Inc. and The Chase Manhattan Bank as Documentation Agents (the "Multi- Year Facility") (incorporated by reference to Exhibit 10.3 to the Form 10). *10.4 First Amendment to the Multi-Year Facility, dated as of December 15, 1998 (incorporated by reference to Exhibit 10.4 to the Form 10). **10.5 Second Amendment to the Multi-Year Facility, dated as of November 24, 1999. **10.6 Credit Agreement, dated as of June 3, 1999 among SurFin Ltd., certain designated subsidiaries, the Banks named therein and Citicorp USA, Inc. as Administrative Agent, Bank of America NT & SA as Syndication Agent, Deutsche Bank A.G., New York and Cayman Islands Branches, as Documentation Agent, The Chase Manhattan Bank, the First National Bank of Chicago, Morgan Guaranty Trust Company of New York and Westdeutsche Landesbank Girozentrale, New York and Cayman Islands Branches, as Senior Managing Agents. **10.7 Revolving Credit Agreement (364-day Facility), dated as of November 24, 1999 among Hughes Electronics Corporation, the Banks named therein and Bank of America, N.A. as Administrative Agent, Citicorp USA, Inc. as Syndication Agent, Deutsche Bank A.G., New York Branch, as Documentation Agent (the "Revolving Credit Agreement - 364-day Facility"). **10.8 First Amendment to Revolving Credit Agreement - 364-day Facility, dated as of December 31, 1999. **10.9 Amended and Restated Revolving Credit Agreement (Multi-Year Facility), dated as of November 24, 1999 among Hughes Electronics Corporation, the Banks named therein and Bank of America, N.A. as Administrative Agent, Morgan Guaranty Trust Company of New York as Syndication Agent, Citicorp USA, Inc. and The Chase Manhattan Bank as Documentation Agents (the "Revolving Credit Agreement - Multi-Year Facility"). **10.10 First Amendment to Revolving Credit Agreement - Multi-Year Facility, dated as of December 31, 1999. **10.11 Revolving Credit Agreement (Bridge Facility), dated as of November 24, 1999 among Hughes Electronics Corporation, the Banks named therein and Bank of America, N.A. as Administrative Agent (the "Revolving Credit Facility -Bridge Facility"). **10.12 First Amendment to Revolving Credit Agreement - Bridge Facility, dated as of December 31, 1999. *10.13 DBS Distribution Agreement between Hughes Communications Galaxy, Inc. and National Rural Telecommunications Cooperative, dated April 10, 1992 (the "DBS Agreement") (incorporated by reference to Exhibit 10.5 to the Form 10).+ *10.14 Addendum I to the DBS Agreement (incorporated by reference to Exhibit 10.6 to the Form 10).
IV-2 HUGHES ELECTRONICS CORPORATION PART IV - Continued ITEM 14. Exhibits, Financial Statement Schedule, and Reports on Forms 8-K (continued)
Exhibit Page Number Number - ------ ------ *10.15 Amendment No. 1 to the DBS Agreement, dated May 11, 1992 (incorporated by reference to Exhibit 10.7 to the Form 10). *10.16 Amendment No. 2 to the DBS Agreement, dated May 26, 1992 (incorporated by reference to Exhibit 10.8 to the Form 10). *10.17 Amendment No. 3 to the DBS Agreement, Letter of Agreement, dated May 29, 1992 (incorporated by reference to Exhibit 10.9 to the Form 10). *10.18 Amendment No. 4 to the DBS Agreement, dated December 1, 1992 (incorporated by reference to Exhibit 10.10 to the Form 10). *10.19 Amendment No. 5 to the DBS Agreement, dated December 11, 1992 (incorporated by reference to Exhibit 10.11 to the Form 10). *10.20 Amendment No. 6 to the DBS Agreement, dated December 23, 1992 (incorporated by reference to Exhibit 10.12 to the Form 10). *10.21 Amendment No. 7 to the DBS Agreement, Letter of Agreement, dated July 9, 1993 (incorporated by reference to Exhibit 10.13 to the Form 10). *10.22 Amendment No. 8 to the DBS Agreement, Letter of Agreement, dated February 14, 1994 (incorporated by reference to Exhibit 10.14 to the Form 10).+ *10.23 Amendment No. 9 to the DBS Agreement, Letter of Agreement, dated June 22, 1994 (incorporated by reference to Exhibit 10.15 to the Form 10). *10.24 Loan Agreement, dated May 15, 1997, between Hughes Network Systems, Inc. and PanAmSat (incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1997 of PanAmSat Corporation (PanAmSat's "Form 10-K"). *10.25 First Amendment to Loan Agreement, dated December 23, 1997 (incorporated by reference to PanAmSat's Form 10-K). *10.26 Subordination and Amendment Agreement, dated as of February 20, 1998, among Hughes Electronics Corporation, PanAmSat and Citicorp USA Inc. (incorporated by reference to PanAmSat's Form 10-K). *10.27 Subordination Agreement, dated as of January 16, 1998, between Hughes Electronics and PanAmSat (incorporated by reference to PanAmSat's Form 10-K). *10.28 Credit Agreement, dated February 20, 1998, among PanAmSat, certain lenders and Citicorp USA (incorporated by reference to PanAmSat's Form 10-K). **27 Financial Data Schedule (for SEC information only). IV-8
- -------------------------------- * Incorporated by reference. ** Filed herewith. + Confidential treatment received for certain portions of this exhibit pursuant to Rule 406 promulgated under the Securities Act. IV-3 HUGHES ELECTRONICS CORPORATION PART IV - Continued ITEM 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K (continued) (b) Reports on Form 8-K One report on Form 8-K, dated October 14, 1999 was filed during the quarter ended December 31, 1999 reporting matters under Item 5, Other Events. IV-4 HUGHES ELECTRONICS CORPORATION SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions Balance at charged to Additions Balance beginning of costs and charged to at end year expenses other accounts Deductions of year ------------- ----------- --------------- ---------- -------- Description - ----------- (Dollars in Millions) For the Year Ended December 31, 1999 Allowances Deducted from Assets Accounts and notes receivable (for doubtful receivables) $(23.9) $(138.9) $(79.5) a $149.4 b $ (92.9) Net investment in sales-type leases (for doubtful receivables) (10.6) - - 0.3 b (10.3) Inventories (principally for obsolescence of service parts) (9.1) (110.4) - 6.0 c (113.5) ------ ------- ------ ------ ------- Total Allowances Deducted from Assets $(43.6) $(249.3) $(79.5) $155.7 $(216.7) ====== ======= ====== ====== ======= For the Year Ended December 31, 1998 Allowances Deducted from Assets Accounts and notes receivable (for doubtful receivables) $(15.1) $ (37.5) $(22.1) a $ 50.8 b $ (23.9) Net investment in sales-type leases (for doubtful receivables) (12.9) - - 2.3 b (10.6) Inventories (principally for obsolescence of service parts) (4.7) (6.4) - 2.0 c (9.1) ------ ------- ------ ------ ------- Total Allowances Deducted from Assets $(32.7) $ (43.9) $(22.1) $ 55.1 $ (43.6) ====== ======= ====== ====== ======= For the Year Ended December 31, 1997 Allowances Deducted from Assets Accounts and notes receivable (for doubtful receivables) $ (7.7) $ (19.4) $(24.2) a, d $36.2 b $ (15.1) Net investment in sales-type leases (for doubtful receivables) - - (13.4) d 0.5 b (12.9) Inventories (principally for obsolescence of service parts) (3.3) (1.6) - 0.2 c (4.7) ------ ------- ------ ------ ------- Total Allowances Deducted from Assets $(11.0) $ (21.0) $(37.6) $ 36.9 $ (32.7) ====== ======= ====== ====== =======
- ---------------------- a. Primarily reflects the recovery of accounts previously written-off and increases resulting from acquisitions. b. Relates to accounts written-off. c. Relates to obsolete parts written-off. d. Resulting from the PanAmSat merger in May 1997, $1.0 million for allowance for doubtful accounts and notes receivable and $13.4 million for allowance for doubtful sales-type lease receivables were added. Reference should be made to the Notes to Financial Statements. IV-5 HUGHES ELECTRONICS CORPORATION SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. HUGHES ELECTRONICS CORPORATION ----------------------------- (Registrant) Date: March 9, 2000 By /s/MICHAEL T. SMITH ------------------- (Michael T. Smith Chairman of the Board of Directors and Chief Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 9th day of March 2000 by the following persons on behalf of the Registrant and in the capacities indicated. Signature Title --------- ----- /s/MICHAEL T. SMITH Chairman of the Board of ) Principal ------------------- Directors and Chief ) Executive (Michael T. Smith) Executive Officer ) Officer /s/ROXANNE S. AUSTIN Senior Vice President and ) -------------------- Chief Financial Officer ) Principal (Roxanne S. Austin) ) Financial ) Officers /s/MARK A. MCEACHEN Vice President and ) ------------------- Treasurer ) (Mark A. McEachen) /s/MICHAEL J. GAINES Controller ) Principal -------------------- Accounting (Michael J. Gaines) Officer /s/THOMAS E. EVERHART Director --------------------- (Thomas E. Everhart) /s/J. MICHAEL LOSH Director ------------------ (J. Michael Losh) /s/HARRY J. PEARCE Director ------------------ (Harry J. Pearce) /s/ECKHARD PFEIFFER Director ------------------- (Eckhard Pfeiffer) ALFRED C. SIKES Director ------------------ (Alfred C. Sikes) /s/JOHN G. SMALE Director ---------------- (John G. Smale) /s/JOHN F. SMITH JR. Director -------------------- (John F. Smith Jr.) /s/BERNEE D.L. STROM Director -------------------- (Bernee D.L. Strom)
IV-6 EX-2.5 2 STOCK PURCHASE AGREEMENT, DATED 01/13/2000 EXHIBIT 2.5 PURCHASE AGREEMENT BETWEEN THE BOEING COMPANY, HUGHES ELECTRONICS CORPORATION AND HUGHES TELECOMMUNICATIONS AND SPACE COMPANY for the purchase and sale of the outstanding capital stock of HUGHES SPACE AND COMMUNICATIONS COMPANY and certain additional outstanding capital stock Dated as of January 13, 2000 TABLE OF CONTENTS -----------------
Section Page - ------- ---- Article I TRANSFER AND ASSUMPTION............................................................. 2 1.1 Transfer and Contribution of Assets.................................................. 2 1.2 Assumption of Liabilities............................................................ 2 1.3 Method of Transfer and Assumption.................................................... 3 1.4 Nonassignable Contracts.............................................................. 3 1.5 Other Agreements..................................................................... 4 Article II SALE AND PURCHASE OF SHARES......................................................... 4 2.1 Sale and Purchase of Shares.......................................................... 4 Article III PURCHASE PRICE AND PAYMENT........................................................... 4 3.1 Amount of Purchase Price............................................................. 4 3.2 Purchase Price Adjustment............................................................ 7 Article IV CLOSING AND TERMINATION............................................................. 9 4.1 Closing Date......................................................................... 9 4.2 Transactions on the Closing Date..................................................... 9 4.3 Termination of Agreement............................................................. 10 4.4 Procedure Upon Termination........................................................... 10 4.5 Effect of Termination................................................................ 11 Article V REPRESENTATIONS AND WARRANTIES OF HUGHES AND THE SELLER............................. 11 5.1 Organization and Good Standing....................................................... 11 5.2 Authorization of Agreement........................................................... 11 5.3 Capitalization....................................................................... 12 5.4 Subsidiaries and Equity Investments.................................................. 12 5.5 Corporate Records.................................................................... 13 5.6 Conflicts; Consents of Third Parties................................................. 13 5.7 Ownership of Additional Satellite Assets and Transfer of Shares; Sufficiency of Assets................................................................ 14 5.8 Financial Statements................................................................. 14 5.9 No Undisclosed Liabilities........................................................... 15 5.10 Absence of Certain Developments...................................................... 15
i 5.11 Taxes................................................................................... 16 5.12 Real Property........................................................................... 17 5.13 Tangible Personal Property.............................................................. 20 5.14 Intangible Property..................................................................... 20 5.15 Material Contracts...................................................................... 27 5.16 Employee Benefits....................................................................... 30 5.17 Labor................................................................................... 31 5.18 Litigation.............................................................................. 32 5.19 Compliance With Laws.................................................................... 32 5.20 Environmental Matters................................................................... 33 5.21 Insurance............................................................................... 35 5.22 Inventories; Receivables; Payables...................................................... 36 5.23 Intercompany Indebtedness............................................................... 37 5.24 United States Contracts................................................................. 37 5.25 Banks................................................................................... 38 5.26 Clearances.............................................................................. 38 5.27 Year 2000 Issues........................................................................ 38 5.28 Financial Advisors...................................................................... 39 5.29 Launch Service Agreements............................................................... 39 Article VI REPRESENTATIONS AND WARRANTIES OF THE PURCHASER........................................ 39 6.1 Organization and Good Standing.......................................................... 39 6.2 Authorization of Agreement.............................................................. 39 6.3 Conflicts; Consents of Third Parties.................................................... 40 6.4 Litigation.............................................................................. 40 6.5 Investment Intention.................................................................... 40 6.6 Financial Capability.................................................................... 41 6.7 Financial Advisors...................................................................... 41 Article VII COVENANTS.............................................................................. 41 7.1 Access to Information................................................................... 41 7.2 Conduct of the Business Pending the Closing............................................. 42 7.3 Consents................................................................................ 45
ii 7.4 Filings with Governmental Bodies........................................................ 45 7.5 Insurance............................................................................... 46 7.6 Novations and Other Transfers........................................................... 47 7.7 Other Actions........................................................................... 47 7.8 No Solicitation......................................................................... 48 7.9 Preservation of Records................................................................. 49 7.10 Publicity............................................................................... 49 7.11 Non-Competition Agreements.............................................................. 50 7.12 Guarantees and Letters of Credit........................................................ 52 7.13 Sublease for Shared Facilities.......................................................... 52 7.14 Guarantee of Performance................................................................ 52 7.15 Access.................................................................................. 53 7.16 Certain Notices......................................................................... 53 7.17 Preferred Provider...................................................................... 53 7.18 On Orbit Incentives..................................................................... 53 7.19 Thuraya................................................................................. 53 7.20 Spaceway................................................................................ 54 Article VIII CONDITIONS TO CLOSING................................................................. 54 8.1 Conditions Precedent to Obligations of Each Party....................................... 54 8.2 Conditions Precedent to Obligations of the Purchaser.................................... 55 8.3 Conditions Precedent to Obligations of the Seller....................................... 56 Article IX DOCUMENTS TO BE DELIVERED............................................................. 56 9.1 Documents to be Delivered by the Seller................................................. 56 9.2 Documents to be Delivered by the Purchaser.............................................. 57 Article X INDEMNIFICATION....................................................................... 57 10.1 Non-Income Tax Indemnification.......................................................... 57 10.2 Certain Limitations..................................................................... 59 10.3 Non-Income Tax Indemnification Procedures............................................... 59 10.4 Employee Benefits and Labor Indemnity................................................... 60 10.5 China Investigation..................................................................... 60 Article XI TAX MATTERS........................................................................... 63 11.1 Filing of Income Tax Returns; Payment of Income Taxes................................... 63
iii 11.2 Indemnification for Income Taxes........................................................ 66 11.3 Refunds................................................................................. 67 11.4 Income Tax Contests..................................................................... 67 11.5 Cooperation and Exchange of Information................................................. 68 11.6 Resolution of Disputes.................................................................. 72 11.7 Payments................................................................................ 73 11.8 Existing Tax Allocation Agreements...................................................... 74 11.9 Section 338(h)(10) Election............................................................. 74 11.10 Transfer Taxes.......................................................................... 75 11.11 Sole Remedy............................................................................. 75 Article XII SURVIVAL.............................................................................. 75 12.1 Survival................................................................................ 75 Article XIII LIMITATION OF LIABILITY DISCLAIMER.................................................... 76 13.1 Liabilities............................................................................. 76 Article XIV MISCELLANEOUS......................................................................... 76 14.1 Certain Definitions..................................................................... 76 14.2 Interpretation.......................................................................... 91 14.3 Dispute Resolution...................................................................... 91 14.4 Expenses................................................................................ 92 14.5 Further Assurances...................................................................... 93 14.6 Submission to Jurisdiction; Consent to Service of Process............................... 93 14.7 Entire Agreement; Amendments and Waivers................................................ 93 14.8 Governing Law........................................................................... 93 14.9 Table of Contents and Headings.......................................................... 93 14.10 Notices................................................................................. 94 14.11 Severability............................................................................ 94 14.12 Binding Effect; Assignment.............................................................. 95
iv Exhibits - -------- EXHIBIT A Intellectual Property Agreement EXHIBIT B Trademark and Trade Name License Agreement EXHIBIT C Technical Services Agreement EXHIBIT D United States Government Contract Agreement EXHIBIT E Employee Matters Agreement EXHIBIT F Information Technology Services Term Sheet EXHIBIT G Transition Services Term Sheet EXHIBIT H Newco Joint Venture Term Sheet v STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT, dated as of January 13, 2000 (the "Agreement"), between HUGHES ELECTRONICS CORPORATION, a Delaware corporation ("Hughes"), HUGHES TELECOMMUNICATIONS AND SPACE COMPANY, a Delaware corporation (the "Seller"), and THE BOEING COMPANY, a Delaware corporation (the "Purchaser"). W I T N E S S E T H: WHEREAS, the Seller owns (i) all of the issued and outstanding shares of common stock (the "Company Shares"), of HUGHES SPACE AND COMMUNICATIONS COMPANY, a Delaware corporation (the "Company"), (ii) all of the issued and outstanding shares of common stock (the "Spectrolab Shares"), of SPECTROLAB, INC., a Delaware corporation ("Spectrolab"), and (iii) approximately 2.69% of the issued and outstanding shares of common stock of ICO Holdings (the "ICO Shares," and together with the Company Shares and the Spectrolab Shares, the "Shares"); and WHEREAS, the Company and its Subsidiaries are engaged in the business of designing and building satellites for both commercial customers and government agencies (the "Satellite Business"); WHEREAS, the Seller desires to sell to the Purchaser, and the Purchaser desires to purchase from the Seller, the Shares for the purchase price and upon the terms and conditions hereinafter set forth; WHEREAS, on or prior to the Closing Date, Hughes shall or shall cause its appropriate Subsidiary to, assign, transfer, convey and deliver the Additional Satellite Assets to the Company, and the Company shall assume the Additional Satellite Liabilities in accordance with Article I hereof (the "Additional Satellite Assets Transfer"); WHEREAS, on or prior to the Closing Date, the Seller shall cause its appropriate Subsidiary to assign, transfer, convey and deliver the Excluded Assets to Hughes or a Subsidiary of Hughes in accordance with Article I hereof (the "Excluded Assets Transfer," and together with the Additional Satellite Assets Transfer, the "Transfers"); WHEREAS, following the Transfers, the Purchaser shall purchase, and the Seller shall sell, the Shares upon the terms and conditions hereinafter set forth; WHEREAS, the parties hereto also intend to enter into certain agreements governing their relationships after the Closing Date as contemplated hereby; and WHEREAS, certain capitalized terms used in this Agreement are defined in Section 14.1; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained, the parties hereby agree as follows: ARTICLE I TRANSFER AND ASSUMPTION 1.1 Transfer and Contribution of Assets. ----------------------------------- (a) Subject to the terms and conditions of this Agreement, on or prior to the Closing Date, Hughes shall, or shall cause its appropriate Subsidiary to, transfer to the Company (or at the Company's election, a Subsidiary of the Company) all of Hughes' (or its Subsidiary's) right, title and interest in and to the Additional Satellite Assets. (b) Subject to the terms and conditions of this Agreement, on or prior to the Closing Date, the Seller shall cause its appropriate Subsidiary to transfer to Hughes (or at Hughes' election, a Subsidiary of Hughes) all of such Subsidiary's right, title and interest in and to the Excluded Assets. (c) Each of the parties hereto acknowledges and agrees that as between and among Hughes and its Affiliates, and the Purchaser and its Affiliates, the Additional Satellite Assets and the Excluded Assets will each be transferred "as is where is" and, except as expressly provided herein, that each Transferor makes and has made no warranty, either express or implied, including warranties of merchantability or fitness for a particular purpose, with respect to any Additional Satellite Assets or Excluded Assets, as the case may be. (d) Each of the representations, warranties, covenants and undertakings of the Seller or Hughes contained herein shall be given or made as if, and on the basis that, the Transfers had occurred prior to all dates relevant therein. Any references to the Company and its Subsidiaries in any such representations, warranties, covenants and undertakings shall be deemed to be a reference to the Company and its Subsidiaries after giving effect to the Transfers unless the context clearly indicates otherwise. 1.2 Assumption of Liabilities. Simultaneously with the actions ------------------------- referred to in Section 1.1(a), the Company, in partial consideration for the Transfer of the Additional Satellite Assets, shall assume and on a timely basis pay, satisfy and discharge (or cause its Subsidiaries to pay, satisfy and discharge) in accordance with their terms any and all Additional Satellite Liabilities. 2 1.3 Method of Transfer and Assumption. The parties hereto --------------------------------- acknowledge and agree that (i) any Transfer shall be effected by delivery by the Transferor to the Transferee of (A) with respect to Excluded Assets which are evidenced by capital stock certificates or similar instruments, certificates duly endorsed in blank or accompanied by stock powers or other instruments of assignment executed in blank, (B) with respect to any real property interest and/or any improvements thereon, a grant deed conveying the property on an "as is where is" basis, and (C) with respect to all other Additional Satellite Assets or Excluded Assets, as the case may be, such good and sufficient instruments of contribution, assignment, conveyance, transfer and delivery, in form and substance reasonably satisfactory to the Purchaser and to the appropriate Transferor and Transferee, as shall be necessary to vest in such Transferee all of the Transferor's right, title and interest in and to any such Assets and (ii) the assumption of the Additional Satellite Liabilities contemplated pursuant to Section 1.2 hereof shall be effected by delivery, by the party assuming such Liability to the party which is the obligor under such Liability, of such good and sufficient instruments of assumption, in form and substance reasonably satisfactory to the Purchaser and to such two parties, as shall be necessary for the assumption of such Additional Satellite Liabilities. Each party hereto also agrees to deliver to each other party hereto such other documents, instruments, certificates and agreements as may be reasonably requested by any such other party hereto in connection with the transactions contemplated hereby and to take such further action as may be reasonably necessary to carry out the provisions hereof. Notwithstanding any provision to the contrary contained in this Agreement, in the event and to the extent that there is any conflict between the provisions of this Agreement and the provisions of any of the instruments of transfer or assumption referred to in this Section 1.3, the provisions of this Agreement shall prevail and govern. To the extent that any Transfers contemplated hereby are not consummated on or prior to the Closing Date, the parties hereto covenant and agree to take all actions reasonably necessary or appropriate to complete such transfers promptly following the Closing Date. 1.4 Nonassignable Contracts. Anything contained herein to the ----------------------- contrary notwithstanding, but subject to Sections 7.3 and 8.2(g), this Agreement shall not constitute an agreement to assign any Contract or Asset if an assignment or attempted assignment of the same without the Consent of another Person would constitute a breach thereof or entitle any other party thereto to terminate, or accelerate or assert additional material rights thereunder. If any such Consent is not obtained or if an attempted assignment would be ineffective or have such other effect, then (a) the party purporting to make such transfer (the "Intended Transferor") shall (i) use its commercially reasonable efforts to provide or cause to be provided to the party entitled to the benefits of such purported transfer (the "Intended Transferee"), to the extent permitted by Law, the benefits of any such Contract or Asset, (ii) cooperate in any lawful arrangements designed to provide such benefits to the Intended Transferee, (iii) enforce, at the request of and for the account of the Intended Transferee, any rights of the Intended Transferor arising from such Contract or Asset, including the right to elect to terminate any such Contract in accordance with the terms thereof upon the advice of the Intended Transferee, and (iv) promptly pay or cause to be paid to the Intended Transferee when received all 3 moneys received by the Intended Transferor with respect to any such Contract or Asset and (b) in consideration for the matters described in clause (a) above the Intended Transferee shall pay, perform and discharge on behalf of the Intended Transferor all of the Intended Transferor's Liabilities thereunder in a timely manner and in accordance with the terms thereof. In addition, the Intended Transferor shall take such other actions as may reasonably be requested by the Intended Transferee in order to place the Intended Transferee, insofar as reasonably possible, in the same position as if such Contract or Asset had been transferred as contemplated hereby and so that all the benefits and burdens relating thereto, including possession, use, risk of loss, potential for gain and dominion, control and command, shall inure to the Intended Transferee. The foregoing arrangements shall be reasonably satisfactory to the Intended Transferee. If and when such Consents are obtained, the transfer of the applicable Contract or Asset shall be effected in accordance with the terms of this Agreement. 1.5 Other Agreements. On the Closing Date, the parties hereto shall ---------------- enter into agreements embodying certain relationships between the Company and the Satellite Business, on the one hand, and Hughes and its remaining businesses, on the other hand, after the Closing Date. These agreements will be in the form set forth in Exhibits A and B with respect to Intellectual Property, Exhibit C with respect to the provision of certain technical services, Exhibit D with respect to certain United States Contract matters and Exhibit E with respect to employee matters. In addition, the parties hereto agree to enter into definitive agreements on the Closing Date that incorporate the agreements with respect to the treatment of information technology services, the provisions of certain transitional services and the establishment of a joint venture between the parties regarding research and development activities on the terms set forth on Exhibit F, G and H, respectively (Exhibits A through H, collectively, the "Definitive Agreements"). ARTICLE II SALE AND PURCHASE OF SHARES 2.1 Sale and Purchase of Shares. Upon the terms and subject to the --------------------------- conditions contained herein, on the Closing Date and after the completion of the Transfers, the Seller shall sell, assign, transfer, convey and deliver to the Purchaser, and the Purchaser shall purchase, acquire and accept from the Seller, the Shares free and clear of any Liens. ARTICLE III PURCHASE PRICE AND PAYMENT 3.1 Amount of Purchase Price. (a) The aggregate purchase price for ------------------------ the Shares shall be $3.75 billion, payable on the Closing Date by wire transfer in immediately available funds to an account designated by the Seller, subject to adjustment 4 pursuant to this Section and Section 3.2 (as adjusted, the "Purchase Price"). Five days prior to the Closing Date, the Seller will deliver to the Purchaser an estimate of the Closing Net Assets, which shall be the net assets as of the end of the most recent accounting month for which internal financial statements are available determined on a basis consistent with the methodology to be employed in the calculation of the Closing Net Assets as set forth below (the "Estimated Closing Net Assets"). To the extent that the Estimated Closing Net Assets are greater than $1,149.0 million (the "Target Amount"), the Purchase Price to be remitted at Closing will be increased by such excess. To the extent that the Estimated Closing Net Assets are less than the Target Amount, the Purchase Price to be remitted at Closing will be decreased by such shortfall. Subsequent to Closing, the provisions of Section 3.2 will be applied. (b) If at or prior to the Closing there shall not have occurred an ICO Pre-Closing Resolution, then an amount equal to 40% of the ICO Contract Estimated Net Asset Value shall be withheld from the Purchase Price and paid into escrow. Such escrow shall be established with a nationally recognized banking institution (as escrow agent) pursuant to an escrow agreement (the "Escrow Agreement") which embodies the terms set forth below together with such other terms and conditions as are agreed by Seller and Purchaser. No escrow shall be established and no withholding of a portion of the Purchase Price shall occur if an ICO Pre-Closing Resolution shall have occurred prior to Closing. (i) The Escrow Agreement shall provide that the funds deposited therein (together with interest earned thereon) shall be released by the escrow agent as follows: (A) upon the occurrence of an ICO Post-Closing Resolution which does not involve an ICO Contract Material Modification, the entire escrow shall be paid to Seller; (B) upon the occurrence of an ICO Post-Closing Resolution which does involve an ICO Contract Material Modification, the ICO Escrow Amount shall be paid to Seller less such amount, if any (which amount shall in no case be more than $25 million) as shall be equal to (A) 40% multiplied by the excess, if any, of (B) any reduction in the net carrying value of assets (i.e., less any liabilities or reserves) relating to the ICO Contract resulting from the ICO Contract Material Modification over (C) the present value (discounted at a rate equal to 7.5% per annum) of any incremental net profit that may be received by Purchaser and its Affiliates as a result of all other agreements or understandings entered into after the Closing, or which are modifications made after the Closing to agreements or understandings existing at the Closing, between Purchaser or its Affiliates and ICO and its Affiliates (such as, but not limited to, contracts to provide launch services, but excluding contracts described in clauses (ii)(x) and (y) of the definition of ICO Post-Closing Resolution), whether or not the value thereof is recorded as an asset for accounting purposes. 5 Any remaining amount of the ICO Escrow Amount shall be paid to Purchaser. Each of Seller and Purchaser shall receive a pro rata portion of the interest earned on the entire escrow fund; (C) upon the entry of a final non-appealable order of a bankruptcy court (or the equivalent): (a) converting the ICO bankruptcy case to a liquidation case; (b) dismissing the ICO bankruptcy without leave on the part of ICO to commence a new bankruptcy case; or (c) confirming a plan for the complete liquidation of the assets of ICO; the entire escrow shall be paid to Purchaser, provided that if the sum of the payments and liquidating distributions paid to the Company or its Affiliates after the Closing which are attributable to the ICO Contract Closing Net Asset Value exceeds 60% of the ICO Contract Closing Net Asset Value, then a portion of the ICO Escrow Amount equal to the dollar amount of such excess, together with a pro rata portion of the interest earned on the entire escrow fund, shall be paid to Seller; or (D) upon the expiration of 24 months following the last day of the month in which the Closing occurs, if no ICO Post-Closing Resolution shall have occurred, the entire escrow shall be paid to Purchaser, provided that if the amounts, if any, paid to the Company or its Affiliates after the Closing which are attributable to the ICO Contract Closing Net Asset Value exceed 60% of the ICO Contract Closing Net Asset Value, then a portion of the ICO Escrow Amount equal to the dollar amount of such excess, together with a pro rata portion of the interest earned on the entire escrow fund, shall be paid to Seller. (ii) The Escrow Agreement also shall provide that if as a result of the resolution of all matters subject to the purchase price adjustment provisions set forth in Section 3.2 hereof (a) the ICO Contract Closing Net Asset Value is determined to be less than the ICO Contract Estimated Net Asset Value (the amount of any such reduction being the "ICO Closing Downward Adjustment"), a portion of the amount initially deposited in escrow equal to 40% of the ICO Closing Downward Adjustment shall be paid to Seller together with a pro rata portion of the interest earned on the entire escrow funds to the date of such payment, or (b) the ICO Contract Closing Net Asset Value is determined to be greater than the ICO Contract Estimated Net Asset Value (the amount of any such increase being the "ICO Closing Upward Adjustment"), Seller shall deposit into the escrow fund an amount equal to 40% of the ICO Closing Upward Adjustment. The Escrow Agreement further shall provide that if in connection with the purchase price adjustment provisions in Section 3.2 there shall exist a dispute between Seller and Purchaser regarding an asset or liability amount relating to the ICO Contract, then no payments shall be made from the escrow funds to any party (even if an ICO Post-Closing Resolution shall have occurred) until the ICO Contract Closing Net Asset Value is determined and the adjustments to the amount of the escrow fund contemplated in this paragraph have been made. The 6 amount (without giving effect to interest earned) which is to constitute the escrow fund, after giving effect to any adjustment contemplated by this Section 3.1(b)(ii), is referred to as the "ICO Escrow Amount." 3.2 Purchase Price Adjustment. ------------------------- (a) Within 60 days after the Closing Date, the Seller shall prepare and deliver to the Purchaser a statement of assets and liabilities of the Company as of the close of business on the Business Day immediately preceding the Closing Date. This statement will take into account the Spectrolab Shares and the ICO Shares and will give effect to the Transfers contemplated by Article I hereof and will be in a format comparable to the unaudited combined statement of assets and liabilities reflected on Schedule 5.8(a) (such statement, the "Closing Statement of Assets and Liabilities"). Except as identified on Schedule 3.2(c) or Schedule 5.8(b), the Closing Statement of Assets and Liabilities will be prepared in accordance with GAAP consistently applied using the same accounting methods, policies, practices and procedures, with consistent classifications and estimation methodologies as were used in the preparation of the Interim Statement of Assets and Liabilities, and will not include any changes in assets or liabilities as a result of purchase accounting adjustments arising from or resulting as a consequence of the transactions contemplated hereby. In the event that the Business Day immediately preceding the Closing Date does not occur at a financial week or month end for accounting purposes, the parties shall agree on mutually acceptable roll forward or roll back procedures. (b) The Closing Statement of Assets and Liabilities shall be accompanied by an additional schedule of information (the "Closing Statement of Net Assets") which will identify the amounts to be eliminated from the Closing Statement of Assets and Liabilities to arrive at amounts to be included in the purchase price adjustment calculation. The first column of the Closing Statement of Net Assets shall consist of the balances from the Closing Statement of Assets and Liabilities. The second column will detail the amounts to be eliminated from the Closing Statement of Assets and Liabilities to arrive at amounts to be included in the determination of the purchase price adjustment calculation. Balances related to the following items will be excluded from all aspects of the purchase price adjustment calculation: the ICO Shares, all pension related accounts, all OPEB related accounts, all other employee related liabilities carried at the Hughes corporate level, all income tax accounts, any reserve for the China Investigation and goodwill. After the elimination of these items, the third column will include the remaining asset and liability balances to be used to determine the Closing Net Assets. (c) The parties hereto agree that the purchase price adjustment is not intended to permit the introduction of different accounting methods, policies, practices, procedures, classifications or estimation methodologies for purposes of determining the asset and liability balances from those used in the preparation of the Interim Statement of Assets and Liabilities unless required by GAAP. Further, the purchase price adjustment shall treat certain items in the manner specified on Schedule 3.2(c) and Schedule 5.8(b). Each party shall provide the other party and its representatives with reasonable access to 7 books and records and relevant personnel during the preparation of the Closing Statement of Net Assets referred to in paragraph (b) above and the resolution of any disputes that may arise under this Section 3.2. (d) If the Purchaser disagrees with the determination of the Closing Net Assets as shown on the Closing Statement of Net Assets, the Purchaser shall notify the Seller in writing of such disagreement within 60 days after delivery of the Closing Statement of Net Assets, which notice shall describe the nature of any such disagreement in reasonable detail, identify the specific items involved and the dollar amount of each such disagreement. The Purchaser shall provide reasonable supporting documentation for each such disagreement no later than three days after delivery of the notice. After the end of such 60-day period, the Purchaser may not introduce additional disagreements with respect to any item in the Closing Statement of Net Assets or increase the amount of any disagreement, and any item not so identified shall be deemed to be agreed to by the Purchaser and will be final and binding upon the parties. Similarly, a disagreement by the Purchaser does not provide any right to the Seller to introduce any changes to net assets not directly related to the disputed item. During the 60-day period of its review, the Purchaser shall have reasonable access to any documents, schedules or workpapers used in the preparation of the Closing Statement of Net Assets. (e) The Purchaser and the Seller agree to negotiate in good faith to resolve any such disagreement and any resolution agreed to in writing by the Purchaser and the Seller shall be final and binding upon the parties. If the Purchaser and the Seller are unable to resolve all disagreements properly identified by the Purchaser pursuant to Section 3.2(d) within 60 days after delivery to Seller of written notice of such disagreement, then the disputed matters shall be referred to the Chief Financial Officers of the respective businesses for resolution. If the Chief Financial Officers are unable to resolve all disagreements within 30 days, then, within 30 days thereafter, the Purchaser and the Seller shall jointly select an arbiter from one of the "Big 5" accounting firms that is not the independent auditor of either the Purchaser or the Seller; if the Purchaser and the Seller are unable to select such an arbiter within such time period, the American Arbitration Association shall make such selection (the person so selected shall be referred to herein as the "Accounting Arbitrator"). The Accounting Arbitrator so selected will only consider those items and amounts set forth in the Closing Statement of Net Assets as to which the Purchaser and the Seller have disagreed within the time periods and on the terms specified above and must resolve the matter in accordance with the terms and provisions of the Agreement. The Accounting Arbitrator shall deliver to the Purchaser and the Seller, as promptly as practicable and in any event within 180 days after his or her appointment, a written report setting forth the resolution of any such disagreement determined in accordance with the terms of the Agreement. The Accounting Arbitrator shall select as a resolution the position of either the Purchaser or the Seller for each item of disagreement (based solely on presentations and supporting material provided by the parties and not pursuant to any independent review) and may not impose an alternative resolution. Such report shall be final and binding upon the Purchaser and the Seller. The 8 fees, expenses and costs of the Accounting Arbitrator shall be borne one-half by the Purchaser and one-half by the Seller. (f) If the Closing Net Assets as finally determined in accordance with this Section 3.2 are less than the Estimated Closing Net Assets, the Purchase Price shall be decreased on a dollar for dollar basis by the amount of such shortfall, and if the Closing Net Assets are greater than the Estimated Closing Net Assets, the Purchase Price shall be increased on a dollar for dollar basis by the amount of such excess. (g) If any adjustment under this Section 3.2 results in a reduction in the Purchase Price, the Seller shall pay to the Purchaser the amount of such reduction, and if any adjustment results in an increase in the Purchase Price, the Purchaser shall pay to the Seller the amount of such increase, in each case, by wire transfer of immediately available funds to an account designated by the party receiving payment within five Business Days after the final determination of the amount of such reduction or increase in Purchase Price, plus interest on the amount of such reduction or increase from the Closing Date to the date of such payment thereof at the per annum rate equal to the rate announced by Citibank, N.A. in the City of New York as its base rate in effect on the Closing Date. ARTICLE IV CLOSING AND TERMINATION 4.1 Closing Date. Subject to the satisfaction of the conditions set ------------ forth in Article VIII hereof (or the waiver thereof by the party entitled to waive that condition), the closing of the Transfers and the subsequent sale and purchase of the Shares provided for in Sections 1.1(a), 1.1(b) and 2.1 hereof (the "Closing") shall take place at 10:00 a.m., at the offices of Gibson, Dunn and Crutcher LLP, located at 333 South Grand Avenue, Los Angeles, California (or at such other place as the parties may designate in writing) no later than five Business Days after the satisfaction or waiver of the conditions set forth in Section 8.1(a) and (b), and if the other closing conditions contained in Article VIII are not then satisfied or waived then on such date as all such conditions are satisfied or waived, or on such other date as the Seller and the Purchaser may designate in writing; provided that the Seller may elect to close the -------- Transfers at an earlier date or a different location in its sole discretion. The date on which the Closing shall be held is referred to in this Agreement as the "Closing Date." 4.2 Transactions on the Closing Date. -------------------------------- (a) At the Closing, the Seller shall deliver to the Purchaser each of the certificates and other documents contemplated by Section 9.1 hereof. (b) At the Closing, the Purchaser shall deliver to the Seller (i) each of the certificates and other documents contemplated by Section 9.2 hereof and (ii) $3.75 9 billion (as adjusted pursuant to Section 3.1) by wire transfer in immediately available funds to the account or accounts designated by the Seller. 4.3 Termination of Agreement. This Agreement may be terminated prior ------------------------ to the Closing as follows: (a) At the election of the Seller or the Purchaser on or after October 31, 2000, if the Closing shall not have occurred by the close of business on such date, provided that the terminating party is not in default in any material respect of any of its covenants or other obligations hereunder; (b) By mutual written consent of the Seller and the Purchaser; (c) By the Seller or the Purchaser if there shall be in effect a final nonappealable Order of a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby; it being agreed that the parties hereto shall promptly appeal any adverse determination which is not nonappealable (and pursue such appeal with reasonable diligence); (d) By the Purchaser, if there shall have been a breach in any material respect of any of the representations, warranties, covenants or agreements on the part of the Seller set forth in this Agreement and such breach has not been cured by the Seller within thirty days after receipt of notice of such breach, and the failure of the Seller to have cured such breach, would reasonably be expected to have a Material Adverse Effect; or (e) By the Seller, if there shall have been a breach in any material respect of any of the representations, warranties, covenants or agreements on the part of the Purchaser set forth in this Agreement and such breach has not been cured by the Purchaser within thirty days after receipt of notice of such breach and the failure of the Purchaser to have cured such breach would reasonably be expected to materially hinder or materially delay the Closing or the ability of the Purchaser to comply with its obligations hereunder or under the Definitive Agreements. Notwithstanding the foregoing, no party shall be entitled to terminate this Agreement pursuant to this Section 4.3, if such party's intentional breach of this Agreement has prevented the satisfaction of a condition. Any termination pursuant to this Section 4.3 shall be effected by a written instrument signed by the terminating party or parties, which instrument shall specify the section hereof pursuant to which this Agreement is being terminated. 4.4 Procedure Upon Termination. In the event of termination by the -------------------------- Purchaser or the Seller, or both, pursuant to Section 4.3 hereof, written notice thereof shall forthwith be given to the other party, and this Agreement shall terminate and the Transfers and the purchase of the Shares hereunder shall be abandoned, without further 10 action by the Purchaser or the Seller. If this Agreement is terminated as provided herein, each party shall redeliver all documents, work papers and other materials of any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the party furnishing the same. 4.5 Effect of Termination. In the event that this Agreement is --------------------- validly terminated as provided herein, then each of the parties shall be relieved of its duties and obligations arising under this Agreement after the date of such termination and such termination shall be without liability to the Purchaser, the Company or the Seller; provided that the obligations of the -------- parties set forth in Sections 4.4, 7.1, 7.10, 14.4, 14.6, 14.8 and 14.3 (but only to the extent a dispute exists concerning the foregoing sections or the right to validly terminate this Agreement) hereof shall survive any such termination and shall be enforceable hereunder; and provided, further, that -------- ------- nothing in this Section 4.5 shall relieve the Purchaser or the Seller of any liability for a breach of this Agreement. ARTICLE V REPRESENTATIONS AND WARRANTIES OF HUGHES AND THE SELLER Each of Hughes and the Seller jointly and severally represents and warrants to the Purchaser that: 5.1 Organization and Good Standing. Each of Hughes, the Seller and ------------------------------ the Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted. The Company is duly qualified or authorized to do business as a foreign corporation and is in good standing under the laws of each jurisdiction in which it owns or leases real property and each other jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification or authorization, with such exceptions as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.2 Authorization of Agreement. Each of Hughes, the Seller and the -------------------------- Company has all requisite power, authority and legal capacity to execute and deliver this Agreement and the Definitive Agreements to which it is a party, as the case may be, and each other agreement, document, or instrument or certificate to be executed by the Seller or the Company in connection with the consummation of the transactions contemplated by this Agreement (such other agreements, documents, instruments or certificates, together with this Agreement and such Definitive Agreements, are collectively referred to herein as the "Seller Documents"), and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement has been, and of each of the other Seller Documents will be at or prior to Closing, and the performance of Hughes', the Seller's and the Company's obligations, as the case may be, hereunder and thereunder have been duly authorized by all necessary corporate action by each of the 11 boards of directors and the stockholders (if necessary) of Hughes, the Seller and the Company, and no other corporate proceedings on the part of Hughes, the Seller or the Company are necessary to authorize such execution, delivery and performance. This Agreement has been, and each of the other Seller Documents will be at or prior to the Closing, duly and validly executed and delivered by each of Hughes, the Seller and the Company (as applicable) and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and each of the other Seller Documents when so executed and delivered will constitute, legal, valid and binding obligations of Hughes, the Seller or the Company, as the case may be, enforceable against Hughes, the Seller or the Company, as the case may be, in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). 5.3 Capitalization. -------------- (a) The authorized capital stock of the Company consists of 1,000 shares of common stock, no par value (the "Common Stock"). As of the date hereof, there are 1,000 shares of Common Stock issued and outstanding and no shares of Common Stock are held by the Company as treasury stock. All of the issued and outstanding shares of Common Stock are owned by the Seller free and clear of any and all Liens and were duly authorized for issuance and are validly issued, fully paid and non-assessable. (b) There are no existing options, warrants, calls, rights, commitments or other agreements of any character to which the Seller or the Company is a party requiring, and there are no securities of the Company outstanding which upon conversion or exchange would require, the issuance, sale or transfer of any additional shares of Common Stock of the Company or other securities convertible into, exchangeable for or evidencing the right to subscribe for or purchase Common Stock of the Company. Neither the Seller nor the Company is a party to any voting trust or other voting agreement with respect to any of the shares of Common Stock of the Company or to any agreement relating to the issuance, sale, redemption, transfer or other disposition of the Common Stock of the Company. 5.4 Subsidiaries and Equity Investments. ----------------------------------- (a) Schedule 5.4 hereto sets forth as of the date hereof (i) the name of each direct or indirect Subsidiary of the Company, (ii) the name of each corporation, partnership, joint venture or other entity (other than the Subsidiaries) in which the Company has, or pursuant to any agreement has the right to acquire at any time by any means, directly or indirectly, an equity interest or investment and (iii) in the case of each of the entities described in clause (i) above, (A) the jurisdiction of incorporation or organization, (B) the authorized capitalization thereof and (C) the share ownership of 12 each such entity. The outstanding shares of Capital Stock of each such Subsidiary are validly issued, fully paid and non-assessable, and all such shares or other equity interests represented as being owned by the Company are owned by it free and clear of any and all Liens (other than Permitted Exceptions). No shares of Capital Stock are held by any Subsidiary of the Company as treasury stock. There is no existing option, warrant, call, commitment or agreement to which any such Subsidiary is a party requiring, and there are no convertible securities of any such Subsidiary outstanding which upon conversion would require, the issuance of any additional Capital Stock of any such Subsidiary or other securities convertible into Capital Stock of any such Subsidiary. The Seller does not, directly or indirectly, own any Capital Stock or other ownership interest in any corporation, partnership, joint venture or other entity that is engaged in the Satellite Business, other than the capital stock represented by the Shares and as listed on Schedule 5.4 hereto. Neither the Seller nor the Company nor any of the Company's Subsidiaries is a party to any Contract, other than this Agreement, relating to the purchase of any interest in, or the obligation to invest in any such entity. (b) Each Subsidiary of the Company is a duly organized and validly existing corporation or other entity in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to own its properties and assets and to conduct its business as now conducted. Each such Subsidiary is duly qualified to do business and is in good standing under the laws of (i) each jurisdiction in which it owns or leases real property and (ii) each other jurisdiction in which the conduct of its business or the ownership of its assets requires such qualification, in each case, with such exceptions as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 5.5 Corporate Records. ----------------- (a) The Seller has delivered or made available to the Purchaser true, correct and complete copies of the certificates of incorporation and by- laws or comparable organizational documents of the Company and each of its Subsidiaries. (b) The minute books of the Company and each of its Subsidiaries previously made available to the Purchaser contain complete and accurate records of all meetings and accurately reflect all other corporate action of the stockholders and board of directors (including committees thereof) of the Company and each of its Subsidiaries. The stock certificate books and stock transfer ledgers of the Company and each of its Subsidiaries previously made available to the Purchaser are true, correct and complete. 5.6 Conflicts; Consents of Third Parties. ------------------------------------ (a) Except as set forth on Schedule 5.6(a), none of the execution and delivery by the Seller and the Company of this Agreement and the other Seller Documents, the consummation of the transactions contemplated hereby or thereby, or the compliance by the Seller and the Company with any of the provisions hereof or thereof will, subject to receiving the consents referred to in Section 5.6(b), (i) conflict with, or 13 result in the breach of, any provision of the certificate of incorporation or by-laws or comparable organizational documents of the Company or any of its Subsidiaries; (ii) conflict with, violate, result in the breach or termination of, or entitle any other party thereto to terminate, or accelerate or assert additional material rights under, any material Permit or Contract to which the Company or any of its Subsidiaries is a party or by which any of them or any of their respective properties or Assets is bound; (iii) conflict with or violate any Law of any Governmental Body by which the Company or any of its Subsidiaries is bound; or (iv) result in the creation of any Lien (other than Permitted Exceptions) upon the properties or Assets of the Company or any of its Subsidiaries except, in the case of clauses (ii), (iii) and (iv), for such conflicts, violations, breaches, defaults or Liens as would not have, individually or in the aggregate, a Material Adverse Effect. (b) Except for the novation of any United States Contract, filings as may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (the "HSR Act"), the laws of the European Union or similar Governmental Bodies and except as otherwise set forth on Schedule 5.6(b), no Consent of any Person or Governmental Body is required on the part of the Seller, the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement or any of the other Seller Documents, or the compliance by the Seller or the Company, as the case may be, with any of the provisions hereof or thereof, other than Consents which have been obtained, or which if not obtained, would not have, individually or in the aggregate, a Material Adverse Effect. 5.7 Ownership of Additional Satellite Assets and Transfer of Shares; ---------------------------------------------------------------- Sufficiency of Assets. - --------------------- (a) The Seller has, or the Company or a Subsidiary thereof will have at the Closing Date, good and valid title to all of the Additional Satellite Assets, free and clear of any and all Liens (other than Permitted Exceptions). The delivery of the Shares to the Purchaser as contemplated by Section 2.1 hereof shall convey to the Purchaser good and valid title to such Shares, free and clear of any and all Liens. (b) Following the Closing and after giving effect to the transactions contemplated hereby, the Purchaser, the Company or the Company's Subsidiaries will own or have contractual rights to use all of the Assets owned by Hughes or any Subsidiary of Hughes and used or held for use by any of them primarily in connection with the Satellite Business, or which are necessary for the conduct of such business as presently conducted. Such Assets are sufficient for the conduct of the Satellite Business, as currently conducted. 5.8 Financial Statements. The Seller has delivered to the Purchaser -------------------- copies of (i) the unaudited combined statements of assets and liabilities of the Company as of December 31, 1997 and 1998 and the related unaudited combined statements of revenues, costs and expenses of the Company for the years then ended and (ii) the unaudited combined statement of assets and liabilities of the Company as of September 30, 1999 14 and the related unaudited combined statement of revenues, costs and expenses of the Company for the nine month period then ended (such unaudited statements in paragraphs (i) and (ii) are referred to herein as the "Financial Statements"). Except as set forth on Schedule 5.8(b), the Financial Statements (x) have been prepared in accordance with GAAP applied consistently with the accounting principles used in the preparation of the audited financial statements of Hughes, (y) take into account the Spectrolab Shares and the ICO Shares and (z) fairly present on a pro forma basis the financial position of the Company and its Subsidiaries after giving effect to the Transfers. For the purposes hereof the unaudited combined statement of assets and liabilities of the Company as of September 30, 1999 is referred to as the "Interim Statement of Assets and Liabilities" and September 30, 1999 is referred to as the "Interim Date." 5.9 No Undisclosed Liabilities. Except as set forth on Schedule 5.9, -------------------------- the Company has no material Liabilities of any kind (whether accrued, absolute, contingent or otherwise, and whether due or to become due) that would have been required to be reflected in or reserved against in the Interim Statement of Assets and Liabilities in accordance with the accounting principles detailed on Schedule 5.8(b). 5.10 Absence of Certain Developments. Except as expressly ------------------------------- contemplated by this Agreement or as set forth on Schedule 5.10, since the Interim Date: (a) there has not been any Material Adverse Change nor has there occurred any event which is reasonably likely to result in a Material Adverse Change; (b) there has not been as of the date hereof any damage, destruction or loss, including condemnation or casualty, whether or not covered by insurance, with respect to the property and assets of the Company or any of its Subsidiaries having a replacement cost of more than $1,000,000 for any single loss or $5,000,000 for all such losses and there has not been any such damage, destruction or Loss not covered by insurance having a replacement cost of more than $5,000,000 for any single loss or $15,000,000 for all such Losses; (c) there has not been any declaration, setting aside or payment of any dividend or other distribution in respect of any Capital Stock of the Company or its Subsidiaries or repurchase, redemption or other acquisition by the Seller or the Company or any of its Subsidiaries of any outstanding Capital Stock of the Company or any of its Subsidiaries; (d) neither the Company nor any of its Subsidiaries has entered into or modified any employment, severance, termination, retention or similar agreements or arrangements with, or granted any bonuses, salary increases, severance or termination pay to, or otherwise increased the compensation or benefits of, any officer, director, consultant or employee other than increases in salary, compensation or benefits of employees other than officers of the Company or its Subsidiaries granted in the ordinary 15 course of business, except as may be required by applicable Law or a binding written Contract in effect on the date of this Agreement; (e) there has not been any material change by the Company or any of its Subsidiaries in accounting methods or policies, except as required by GAAP; (f) neither the Company nor any of its Subsidiaries has entered into any transaction or Contract, or otherwise conducted its business, other than in the ordinary course of business other than (i) as may arise out of negotiations relating to the Company's contract with and/or investment in ICO and ICO Holdings and (ii) the settlement of any Legal Proceeding involving the China Investigation; (g) neither the Company nor any of its Subsidiaries has failed to pay or otherwise discharge current Liabilities on a timely basis except where disputed in good faith by appropriate proceedings and except for immaterial oversights or errors; (h) other than in the ordinary course of business, neither the Company nor any of its Subsidiaries has made any material loans, advances or capital contributions to, or investments in, any Person or paid any material fees or expenses to the Seller or any Affiliate of the Seller; (i) neither the Company nor any of its Subsidiaries has made or committed to make any capital expenditures or capital additions or betterments in excess of $5,000,000 individually or $25,000,000 in the aggregate; (j) neither the Company nor any of its Subsidiaries has instituted or settled any material Legal Proceeding (other than the settlement of any Legal Proceeding involving the China Investigation after the date hereof); (k) neither the Company nor any of its Subsidiaries has made any acquisition, or any sale, lease or disposition, of any material Assets of the Satellite Business, except in the ordinary course of business consistent with past practice; and (l) neither the Seller nor the Company has agreed to do anything set forth in this Section 5.10. 5.11 Taxes. Except as set forth on Schedule 5.11: ----- (a) (i) All material Tax Returns required to be filed by or on behalf of the Company or any of its Subsidiaries have been duly and timely filed with the appropriate taxing authorities (after giving effect to any valid extensions of time in which to make such filings) and (ii) all amounts shown on such Tax Returns (including interest and penalties) as due from the Company or any of its Subsidiaries have been fully and timely paid. (b) The Company and its Subsidiaries have complied in all material respects with all applicable Laws relating to the withholding of Taxes and have duly and 16 timely withheld from employee salaries, wages and other compensation and have paid over to the appropriate taxing authorities all material amounts required to be so withheld and paid over for all periods under all applicable Laws. (c) As of the date of this Agreement, all material deficiencies asserted or assessments made as a result of any examinations by any taxing authority of Tax Returns (other than Income Tax Returns) of or covering the Company or any of its Subsidiaries have been fully paid and there are no other audits or investigations relating to any Tax Returns (other than Income Tax Returns) by any taxing authority in progress, nor have the Seller or the Company or any of its Subsidiaries received any written notice from any taxing authority that it intends to conduct such an audit or investigation. (d) The Seller is not a foreign person within the meaning of Section 1445 of the Code. (e) Neither the Company nor any of its Subsidiaries is a party to any tax sharing or similar agreement or arrangement (whether or not written) pursuant to which it will have any obligation to make any payments after the Closing Date. (f) The Company and those Subsidiaries of the Company listed on Schedule 5.11(f) join in the filing of a consolidated federal income tax return with the Seller and GM and neither the Company nor any of its Subsidiaries has been a member of an affiliated group of corporations (within the meaning of Section 1504(a)) filing a consolidated federal income tax return (or a group of corporations filing a consolidated, combined or unitary income tax return under comparable provisions of state, local, or foreign tax law) for any taxable period, other than a group the common parent of which is GM. (g) None of the Assets of the Company or any its Subsidiaries is property that either the Company or the Subsidiary (A) is required to treat as being owned by any other person pursuant to the so-called "safe harbor lease" provisions of former Section 168(f)(8) of the Internal Revenue Code of 1954, as in effect immediately prior to enactment of the Tax Reform Act of 1986; (B) directly or indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code; or (C) is "tax-exempt use property" within the meaning of Section 168(h) of the Code. 5.12 Real Property. ------------- (a) Owned Real Property. Schedule 5.12(a) sets forth a complete list of all real property and interests in real property owned as of the date hereof by the Company and its Subsidiaries, or that prior to the Closing after giving effect to the Transfers, will be owned in fee by the Company or one of its Subsidiaries (individually, an "Owned Property," and collectively, the "Owned Properties"). The Company and each of its Subsidiaries have, or will have prior to the Closing Date, good, marketable and insurable fee title to the Owned Property, free and clear of any and all Liens (other than Permitted Exceptions). The Seller has delivered, made available or will make available 17 to the Purchaser, prior to the Closing with respect to the Owned Property being conveyed to the Company, true, correct and complete copies of all deeds, title insurance policies, surveys, mortgages and other material documents in its possession granting the Company or one of its Subsidiaries title to or otherwise affecting or evidencing the state of title with respect to the Owned Properties (the "Owned Properties Documents") and, to the Knowledge of the Seller, the legal descriptions in such deeds are true and correct. (b) Leased Property. Schedule 5.12(b) sets forth a complete list of all leases, licenses, subleases, easements and occupancy agreements, together with any amendments, modifications and supplements thereto (the "Leases") with respect to all real property and interests in real property leased as of the date hereof, or that will be leased prior to the Closing after giving effect to the Transfers, by the Company or one of its Subsidiaries (individually, a "Leased Property," and collectively the "Leased Properties," and the Leased Properties together with the Owned Properties, being referred to herein individually as a "Company Property" and collectively as the "Company Properties"). The Seller has delivered or made available to the Purchaser true, correct and complete copies of the following: (i) Leases, together with all amendments, modifications and supplements thereto (the Leases together with the Owned Properties Documents are collectively referred to herein as the "Title Documents"); and (ii) true and complete copies of each Phase 1 and Phase 2 environmental report that has been prepared with respect to any of the Company Properties within the last 5 years. The Company and its Subsidiaries hold their respective leasehold interests under each Lease to which the Company or such Subsidiary is the lessee or sub-lessee, free and clear of all Liens other than Permitted Exceptions. Without limiting the generality of the foregoing, Schedule 5.12(b) identifies any material lease, sublease, license or similar agreement affecting any material interest in real property under which the Company or any of its Subsidiaries is or will be as of the Closing Date (after giving effect to the Transfers) a lessor, sublessor, licensor or grantor. (c) Except as set forth on Schedule 5.12(c), each of the Leases is or will be as of the Closing Date, after giving effect to the Additional Satellite Assets Transfer, to the Seller's Knowledge, in full force and effect and is or will be as of the Closing Date the legal, valid and binding obligation of the Company and/or its Subsidiaries, enforceable against them in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). No option has been exercised under any of such Leases, except options whose exercise has been evidenced by a written document, a true, complete and accurate copy of which has been delivered or made available to the Purchaser with the corresponding Lease. Except as set forth on Schedule 5.12(c), there is no material default under any of the Leases by the Company or, to the Seller's Knowledge, any other party thereto. (d) Except as set forth on Schedule 5.12(d): 18 (i) To the Seller's Knowledge, each of the Leases and Owned Property Documents constitutes the valid and binding obligation of each of the other parties thereto, enforceable against them in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity); (ii) To the Seller's Knowledge, none of the Company or the Subsidiaries nor any other party to a Title Document is in default with respect to any material term or condition thereof, and no event has occurred that, with the passage of time or the giving of notice or both, would constitute a default thereunder or would cause the acceleration of any obligation of any party thereto or the creation of a Lien upon any asset of any of the Company or any Subsidiaries, except in each case for such defaults or events that are not material; (iii) The Company and each of its Subsidiaries have not experienced during the two years preceding the date hereof any material interruption in the delivery of adequate quantities of any utilities (including electricity, natural gas, potable water, and fuel oil) or other public services (including, without limitation, sanitary and industrial sewer service) required by the Company or its Subsidiaries in the operation of their businesses during such period; (iv) The Seller has not received from any relevant Government Body any written notice of violation of the Americans with Disabilities Act that remains uncured; (v) There is no special proceeding pending or, to the Seller's Knowledge, threatened in which any taxing authority having jurisdiction over any Company Property is seeking to materially increase the assessed value thereof; (vi) There is no condemnation or eminent domain proceeding pending which relates to any of the Company Properties, and to the Seller's Knowledge, there is no such proceeding threatened by any relevant Governmental Body; and (vii) To the Seller's Knowledge, the Company Properties are in compliance with restrictive covenants. (e) All of the Company Property, buildings, fixtures and improvements thereon owned or leased by the Company and its Subsidiaries are in good condition and repair (ordinary wear and tear excepted) and the operation thereof as presently conducted is not in material violation of any applicable code, zoning ordinance or other similar zoning laws. 19 5.13 Tangible Personal Property. -------------------------- (a) Schedule 5.13(a) sets forth a complete list of all leases of personal property involving annual payments in excess of $1,000,000 (the "Personal Property Leases") relating to personal property used in the Satellite Business or to which the Company or any of its Subsidiaries is a party or by which the properties or Assets of the Company or any of its Subsidiaries are bound. The Seller has delivered or otherwise made available to the Purchaser true, correct and complete copies of the Personal Property Leases, together with all amendments, modifications or supplements thereto. (b) Except as set forth on Schedule 5.13(a), each of the Personal Property Leases is in full force and effect and is the legal, valid and binding obligation of the Company and/or its Subsidiaries, enforceable against them in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) and, to the Seller's Knowledge, any third party thereto. There is no material default under any Personal Property Lease by the Company or any of its Subsidiaries or, to the Seller's Knowledge, by any other party thereto, and to the Seller's Knowledge, no event has occurred that with the lapse of time or the giving of notice or both would constitute a material default thereunder. (c) All items of tangible personal property reflected in the Interim Statement of Assets and Liabilities which, individually or in the aggregate, are material to the operation of the Satellite Business (except for items sold or disposed of subsequent to the date thereof in the ordinary course of business), are in good condition (ordinary wear and tear excepted). 5.14 Intangible Property. (a) Certain Definitions. When used in ------------------- this Section 5.14, the following capitalized terms shall have the following meanings: (i) "Intellectual Property Rights" means intellectual property rights ---------------------------- arising from or in respect of the following, whether protected, created or arising under the laws of the United States or any other jurisdiction: (A) fictional business names, trade names, trademarks and service marks (whether registered or unregistered, including any applications for registration of any of the foregoing), logos, Internet domain names, trade dress rights and general intangibles of a like nature, together with the goodwill associated with any of the foregoing (collectively, "Marks"); ----- (B) patents and applications therefor, including continuation, divisional, continuation-in-part, or reissue patent applications and patents issuing thereon (collectively, "Patents"); ------- 20 (C) copyrights and registrations and applications therefor (collectively, "Copyrights") and mask work rights; and ---------- (D) know-how, inventions, discoveries, concepts, ideas, methods, processes, designs, formulae, technical data, drawings, specifications, data bases and other proprietary and confidential information, including customer lists, in each case excluding any rights in respect of any of the foregoing that comprise or are protected by Copyrights, mask work rights or Patents (collectively, "Trade Secrets"); -------------- (ii) A "Material" Intellectual Property Right or item of Software is -------- one that is material to the operation of the Satellite Business; and (iii) "Software" means any and all (w) computer programs, including -------- any and all software implementations of algorithms, models and methodologies, whether in source code or object code, (x) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (y) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, and (z) all documentation, including user manuals and training documentation, relating to any of the foregoing. (b) Marks. Schedule 5.14(b) sets forth an accurate and complete ------ list of all registered Marks, pending applications for registration of any Marks and Material unregistered Marks, in each case owned by Hughes and its Subsidiaries and used in the Satellite Business (collectively, "Owned Marks"), indicating for each (to the extent applicable) the applicable owner jurisdiction, registration or application number and date issued (or date filed) and the class of goods or services to which such Owned Mark relates. Except as may be set forth in Schedule 5.14(b): (i) Hughes and its Subsidiaries own all right, title and interest in each of the Owned Marks, free and clear of any and all Liens (other than Permitted Exceptions), and none of Hughes or any of its Subsidiaries has received any written notice or claim challenging Hughes' or its Subsidiaries' ownership of any of the Material Owned Marks; (ii) to the Knowledge of the Seller, none of Hughes or any of its Subsidiaries has taken any action (or failed to take any action), conducted the Satellite Business, or used or enforced any of the Owned Marks, in each case in a manner that would result in the abandonment, cancellation, forfeiture, relinquishment, or unenforceability of any of the Material Owned Marks; (iii) to the Knowledge of the Seller, Hughes and its Subsidiaries have taken reasonable steps to protect Hughes' and its Subsidiaries' rights in and to each of the Material Owned Marks and to prevent the unauthorized use thereof by any other Person; 21 (iv) None of Hughes or any of its Subsidiaries has granted to any Person any right, license or permission to use any of the Material Owned Marks; (v) all Owned Marks that have been registered have been effectively registered in accordance with all applicable material legal requirements and, to the Knowledge of the Seller, are currently in compliance in all material respects with all applicable legal requirements (including as to payment of maintenance fees and the like); (vi) no Material Owned Mark has been or is now involved in any material opposition or cancellation proceeding and no written notice has been received by Hughes or any of its Subsidiaries indicating an intention on the part of any Person to bring any such action; (vii) to the Seller's Knowledge, the use of any of the Material Owned Marks does not create a likelihood of confusion with any trade name, trademark or service mark of any other Person; (viii) to the Seller's Knowledge, there has been no prior use of any Material Owned Marks by any third party which would confer upon such third party superior rights in such Owned Marks; and (ix) to the Seller's Knowledge, no other Person has infringed or is infringing on any of the Owned Marks, so as to materially affect the Satellite Business. (c) Owned Patents. Schedule 5.14(c) sets forth an accurate and ------------- complete list of all unexpired Patents owned by Hughes and its Subsidiaries and used in the Satellite Business (collectively, "Owned Patents"). Except as may be set forth on Schedule 5.14(c): (i) Hughes and its Subsidiaries are the owners of all right, title and interest in and to all Owned Patents, in each case free and clear of any and all Liens (other than Permitted Exceptions), and Hughes and its Subsidiaries have not received any written notice or claim challenging Hughes' and its Subsidiaries' ownership of any of the Material Owned Patents or asserting that any other Person has any material claim of ownership with respect thereto; (ii) Hughes and its Subsidiaries have not received any written notice or claim challenging the validity or enforceability of any of the Material Owned Patents or indicating an intention on the part of any Person to bring a claim that any such Owned Patent is invalid, is unenforceable or has been misused; (iii) Hughes and its Subsidiaries have taken reasonable steps to protect ownership of Hughes and its Subsidiaries in and to the Owned Patents; 22 (iv) none of Hughes or any of its Subsidiaries has granted to any Person any right, license or permission to make satellites, satellite subsystems or components thereof in competition with the Satellite Business under any of the Material Owned Patents other than licenses granted in the ordinary course of business (x) to customers involving customer-funded development of such satellites, satellite subsystems or components, or (y) to vendors under contracts involving improvements to vendor-supplied technology or products; (v) to the Knowledge of the Seller, all of the Owned Patents are currently in compliance in all material respects with applicable legal requirements (including payment of maintenance fees and the like); (vi) no Owned Patent is involved in any material interference, reissue, reexamination or any other material litigation or like proceeding; and (vii) to the Seller's Knowledge, the activities, technology, products or operations of no other Person has infringed or is infringing on any of the Owned Patents, so as to materially affect the Satellite Business. (d) Owned Copyrights. Schedule 5.14(d) sets forth an accurate and ---------------- complete list of all registered Copyrights (whether registered with the United States Copyright Office or in the appropriate office in any foreign jurisdiction) owned by Hughes and its Subsidiaries and used in the Satellite Business, indicating for each the owner thereof, and pending applications for registration of Copyrights filed by Hughes and its Subsidiaries and used in the Satellite Business (or by a third party that has assigned its rights thereunder to Seller) anywhere in the world (collectively, "Registered Copyrights"). Except as may be set forth on Schedule 5.14(d): ---------------- (i) Hughes and its Subsidiaries are the owners of all right, title and interest in and to each of the Registered Copyrights and each of the other Copyrights in any works of authorship prepared by or for Hughes or its Subsidiaries that are material to the operation of the Satellite Business (in the case of such Copyrights in works of authorship prepared for, but not by, Hughes or its Subsidiaries, the foregoing being limited to the Knowledge of the Seller) other than those as to which the rights being exercised by Hughes or its Subsidiaries in the Satellite Business have been licensed from another Person (collectively, "Owned Copyrights"), free and clear of any and all Liens (other than Permitted Exceptions), and Hughes and its Subsidiaries have not received any written notice or claim challenging Hughes' and its Subsidiaries' ownership of any of the Material Owned Copyrights or asserting that any other Person has any claim of ownership with respect thereto; (ii) none of Hughes or any of its Subsidiaries has received any written notice or claim challenging or questioning the validity or enforceability of any of the Material Owned Copyrights or indicating an intention on the part of any 23 Person to bring a claim that any Material Owned Copyright is invalid, is unenforceable or has been misused; (iii) to the Knowledge of the Seller, none of Hughes or any of its Subsidiaries have taken any action or failed to take any action (including a failure to disclose required information to the United States Copyright Office in connection with any registration of a Registered Copyright therewith) or used or enforced any of the Owned Copyrights, in each case in a manner that would result in the unenforceability of any of the Material Owned Copyrights; (iv) Hughes and its Subsidiaries have taken reasonable steps to protect Hughes' and its Subsidiaries' ownership in and to the Owned Copyrights; (v) none of Hughes or any of its Subsidiaries has granted to any Person any right, license or permission to exercise any rights under any of the Material Owned Copyrights other than licenses of Software, documentation and data granted in the ordinary course of business to customers or vendors; and (vi) to Seller's Knowledge, no other Person has infringed or is infringing any of the Owned Copyrights so as to materially affect the Satellite Business. (e) Trade Secrets. Schedule 5.14(e) sets forth an accurate and ------------- complete list of all invention disclosures owned by Hughes and its Subsidiaries and used in the Satellite Business that are not covered by any patents or patent applications included in the Owned Patents, excluding any of the foregoing as to which Hughes or any such Subsidiaries no longer intends to pursue possible patent protection therefor (collectively, the "Invention Disclosures"). Hughes and its Subsidiaries have taken reasonable precautions in accordance with standard industry practice to protect the secrecy, confidentiality and value of all Invention Disclosures and all other Material Trade Secrets of Hughes and its Subsidiaries and used in the Satellite Business (collectively, "Owned Trade Secrets"). Except as may be set forth in Schedule 5.14(e): (i) Hughes and its Subsidiaries own all of the Owned Trade Secrets and none of the Owned Trade Secrets is subject to any Liens (other than Permitted Exceptions), and Hughes and its Subsidiaries have not received any written notice or claim challenging Hughes' and its Subsidiaries' ownership of any of the Material Owned Trade Secrets; (ii) to the Knowledge of the Seller, there has been no disclosure by Hughes or any of its Subsidiaries of material confidential information or other Owned Trade Secrets to any other Person, except in the ordinary course of business and subject to restrictions that are reasonable, appropriate and practicable in the circumstances and that, to the Knowledge of the Seller, have been complied with in all material respects; and 24 (iii) to the Knowledge of the Seller, no other Person has misappropriated any of the Owned Trade Secrets so as to materially affect the Satellite Business. (f) Software. Schedule 5.14(f) sets forth a complete and accurate -------- list of (i) all Software that, to the Knowledge of the Seller, is owned exclusively by Hughes and its Subsidiaries and otherwise is material to the operation of the Satellite Business (collectively, the "Owned Software"), and (ii) all Software that is used by Hughes or any of its Subsidiaries in the Satellite Business that is not exclusively owned by Seller (collectively, the "Licensed Software"), excluding Software available on reasonable terms through commercial distributors or in consumer retail stores for a license fee of no more than One Hundred Thousand Dollars ($100,000) (collectively, "COTS Software"). Except as may be set forth on Schedule 5.14(f): (i) Hughes and its Subsidiaries are the owners of all right, title and interest in and to all Owned Software, including without limitation all Copyrights, Trade Secrets and other Intellectual Property Rights relating thereto, in each case free and clear of any and all Liens (other than Permitted Exceptions), and Hughes and its Subsidiaries have not received any written notice or claim challenging Hughes' and its Subsidiaries' ownership of any of the Material Owned Software or any Intellectual Property Rights relating thereto, or asserting that any other Person has any material claim of ownership with respect thereto; (ii) of Hughes or its Subsidiaries has granted to any Person any right, license or permission to distribute any Material Owned Software used in the Satellite Business in connection with the sale to third parties of satellites, satellite subsystems or components thereof in competition with the Satellite Business, including under any of its Copyrights, Trade Secrets or other Intellectual Property Rights therein, excluding any licenses granted in the ordinary course of business (x) to customers involving customer-funded development of such satellites, satellite subsystems or components, or (y) to vendors under contracts involving improvements to vendor-supplied technology or products; (iii) Hughes and its Subsidiaries have treated the source code of the Owned Software, and the data associated therewith, as confidential and proprietary business information, and have taken reasonable steps to protect the same as trade secrets of Hughes and its Subsidiaries including through appropriate confidentiality undertakings in any licenses of source code granted to customers of the Satellite Business that are reasonable, appropriate and practicable in the circumstances. (g) Agreements in Respect of Licensed Technology. Schedule 5.14(g) -------------------------------------------- contains a complete and accurate list of all agreements pertaining to any material technology (other than Software) used or practiced by Hughes and its Subsidiaries in the Satellite Business as to which a Person other than Hughes and its Subsidiaries owns any Intellectual Property Rights (together with the agreements pertaining to Licensed 25 Software other than COTS Software, the "Licensed Technology Agreements"). Schedule 5.14(g) sets forth a complete and accurate list of all material payment obligations of Hughes or any of its Subsidiaries in the Satellite Business under any Licensed Technology Agreements. To the Seller's Knowledge, except as may be set forth in Schedule 5.14(g): (i) all Licensed Technology Agreements are, and until the Closing Date will remain (to the extent the technology licensed under the particular Licensed Technology Agreement continues to be used in the Satellite Business until the Closing Date), in full force and effect, and Hughes or its Subsidiary that is party thereto is not in material breach thereof; (ii) there are no written notices of any disputes or disagreements with respect to any Licensed Technology Agreement; and (iii) the rights licensed under each Material Licensed Technology Agreement shall be exercisable by the Company or any of its Subsidiaries after the Closing Date to the same extent as exercisable by Hughes or its Subsidiaries prior to the Closing Date (subject to any applicable Consent requirement). (h) Infringement. Except as may be set forth in Schedule 5.14(h), ------------ neither Hughes nor any of its Subsidiaries is, nor has Hughes and its Subsidiaries been during the two (2)-year period prior to the date hereof, a party to any action or proceeding, nor is any material action or proceeding threatened in writing, that involves or involved a claim of infringement, misappropriation or other wrongful use or exploitation, by any Person against Hughes or any of its Subsidiaries of any material Intellectual Property Right used or exploited by Hughes or any of its Subsidiaries in the conduct of the Satellite Business. Except as may be set forth in Schedule 5.14(h), to the Knowledge of Seller, the use, practice or other commercial exploitation of (a) any Owned Marks, Owned Patents, Owned Copyrights, Owned Trade Secrets and Intellectual Property Rights licensed under Licensed Technology Agreements or (b) any of the products or technologies used, made, marketed, sold or licensed by the Company or any of its Subsidiaries in the Satellite Business as presently conducted do not materially infringe upon, violate, or result in a misappropriation of, any patent, copyright, trade secret or other Intellectual Property Right of any Person, nor, to the Seller's Knowledge, is any of the foregoing subject to any outstanding order, judgment, decree, stipulation or agreement restricting the use thereof by Hughes or its Subsidiaries, except as would not materially affect the Satellite Business. Except as may be set forth in Schedule 5.14(h), Hughes and its Subsidiaries have the right to bring actions against any Person that is infringing any Owned Marks, Owned Patents, Owned Copyrights or Owned Trade Secrets and to retain for themselves any damages recovered in any such action. (i) Employee Confidentiality Agreements. Except as set forth in ------------------------------------ Schedule 5.14(i), to the Knowledge of the Seller: 26 (i) all current and former employees and consultants of Hughes and its Subsidiaries whose duties or responsibilities relate to the Satellite Business have entered into confidentiality and invention assignment agreements with Hughes and its Subsidiaries in substantially the form provided to the Purchaser with exceptions that are not material; (ii) no such employee or consultant of Hughes or its Subsidiaries is obligated under any agreement (including licenses, covenants or commitments of any nature) or subject to any judgment, decree or order of any court or administrative agency, or any other restriction that would materially interfere with the use of his or her best efforts to carry out his or her duties for Hughes and its Subsidiaries, which restriction, individually or together with any and all other such restrictions, is material to the Satellite Business; and (iii) the carrying on of the Satellite Business by such employees and contractors of Hughes and its Subsidiaries and the conduct of the Satellite Business as presently proposed, will not, to the Seller's Knowledge, result in a material breach of the terms, conditions or provisions of, or constitute a material default under, any contract or agreement under which any of such employees or consultants are obligated, which breach or default, individually or together with any and all other such breaches or defaults, is material to the Satellite Business. (j) Disabling Code and Contaminants. Hughes and its Subsidiaries have ------------------------------- taken reasonable steps and implemented reasonable procedures to ensure that (i) systems and components made or manufactured by Hughes and its Subsidiaries for use in the Satellite Business and in which Software is embedded or incorporated are free of any disabling codes or instructions (a "Disabling Code"), and any -------------- virus or other intentionally created, undocumented contaminant (a "Contaminant"), that may, or may be used to, access, modify, delete, damage or ----------- disable any Systems (as defined below) or that may result in damage thereto and (ii) its internal computer systems (consisting of hardware, software, databases or embedded control systems, "Systems") are free from Disabling Codes and ------- Contaminants. Except as may be set forth on Schedule 5.14(j), the Seller has in place appropriate disaster recovery plans, procedures and facilities and has taken reasonable steps to safeguard its Systems and restrict unauthorized access thereto. 5.15 Material Contracts. (a) Schedule 5.15(a) sets forth all of the ------------------ following Contracts to which the Company or any of its Subsidiaries is a party or by which any of them is bound (collectively, the "Material Contracts") other than classified government contracts: (i) Contracts with the Seller, any Subsidiary of the Seller, or any current or former officer or director of the Seller or any of its Subsidiaries; (ii) Contracts with any labor union or association representing any employee of the Company or any of its Subsidiaries; 27 (iii) any Contracts featuring incentive payments reasonably expected to extend for a period more than one year beyond the Closing Date and (A) pursuant to which the Company or any of its Subsidiaries is required to purchase or sell a stated portion of its requirements or output from or to another party and (B) involving a future annual payment in excess of $1,000,000 (other than any Contracts entered into from and after the date hereof in the ordinary course of business); (iv) Contracts for the pending sale of any of the material Assets of the Company or any of its Subsidiaries other than in the ordinary course of business or Contracts for the grant to any Person of any preferential rights to purchase any of its Assets; (v) any joint venture or teaming agreements; (vi) Contracts containing covenants of the Company or any of its Subsidiaries not to compete in any line of business or with any Person in any geographical area, or covenants of any other Person not to compete with the Company or any of its Subsidiaries in any line of business or in any geographical area; (vii) Contracts relating to the proposed acquisition by the Company or any of its Subsidiaries of any operating business or the Capital Stock of any other Person with a value in excess of $1,000,000 (other than purchases of inventory in the ordinary course of business); (viii) Contracts relating to the borrowing of money; (ix) Contracts with the Company's ten largest customers (as measured by the dollar amount of purchases thereby in 1998); (x) Contracts with the Company's ten largest suppliers (as measured by the dollar amount of purchases therefrom in 1998); (xi) any Contract relating to capital expenditures not contemplated by the capital expenditures budget of the Company and its Subsidiaries, copies of which have been provided to the Purchaser, and involving future payments which, together with future payments under all other Contracts relating to the same capital project, exceed $25,000,000; (xii) a power of attorney (other than powers of attorneys given in the ordinary course of the Satellite Business); (xiii) other than any progress payment Liens arising from progress payments made by the United States Government or any agency thereof or any other Governmental Body on United States Contracts, any mortgage, pledge, 28 security agreement, deed of trust or other document granting a material Lien (including material Liens upon properties acquired under conditional sales, capital leases or other title retention or security devices); (xiv) any multiple launch Contract relating to the provision of launch services, other than any such Contract with the Purchaser or its Affiliates; (xv) any financial obligation or guarantee issued by Hughes or its Subsidiaries relating to contractual obligations being performed or to be performed by the Company or its Subsidiaries; (xvi) the ten largest Contracts between the Company and each of its (A) foreign sales consultants and (B) domestic consultants; or (xvii) any other Contracts, other than Leases, which involve the expenditure of more than $10,000,000 annually. (b) Except as set forth on Schedule 5.15(b) and, excluding, for purposes of this Section 5.15(b), joint venture and teaming agreements not, individually or in the aggregate, material to the business, properties, results of operations or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole: (i) Neither the Company nor any of its Subsidiaries has received written notice of any material performance deficiencies, schedule delinquencies or warranty claims with respect to the Company's performance of a Material Contract; (ii) Neither the Company nor any of its Subsidiaries has received written notice of the intent of a customer to a Material Contract to terminate, cancel, repudiate, or otherwise materially reduce the scope of performance or compensation originally specified by such Contract, or demand liquidated damages, price reductions or rebates in amounts that are material, or deny material performance incentives, or impose any other form of material penalty; (iii) To the Seller's Knowledge, there is no material defect, discrepancy, non-conformance or deficiency in material equipment, supplies or services that are the subject of a Material Contract, that became known only after delivery to the customer; and (iv) Except as set forth in the Material Contracts or as previously disclosed in writing to the Purchaser, none of the Seller, the Company nor any of the Company's Subsidiaries have made any form of written undertaking, promise or financial guarantee with respect to the date of completion of manufacturing or of delivery of satellites, receipt of necessary export permits, date of preliminary or final acceptance, commencement date of services provided by satellites, date of 29 launch services for satellite, on-orbit performance of satellites, or operable life or effectiveness of satellites. (c) Except for the launch service agreements listed on Schedule 5.29 and for classified government contracts, there have been made available to the Purchaser true, correct and complete copies of all of the Material Contracts. Except as set forth on Schedule 5.15(b), each of the Material Contracts is in full force and effect and is the legal, valid and binding obligation of the Company and/or its Subsidiaries, enforceable against them in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) and, to the Seller's Knowledge, of any third party thereto. Except as set forth on Schedule 5.15(b), neither the Company nor any of its Subsidiaries nor, to the Seller's Knowledge, any other party thereto, is in default in any material respect under any Material Contracts. 5.16 Employee Benefits. ----------------- (a) Schedule 5.16(a) sets forth a complete and correct list of all "employee benefit plans," as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any severance pay, vacation pay, company awards, salary continuation, sick leave, excess benefit, supplemental retirement, deferred compensation, bonus or other incentive compensation, stock purchase, life insurance and scholarship plans, programs or policies to which the Company or any of its Subsidiaries contributes or is obligated to contribute thereunder with respect to employees of the Company (the "Employee Benefit Plans"). (b) Each of the Employee Benefit Plans intended to qualify under Section 401 of the Code (the "Qualified Plans") so qualify and the trusts maintained pursuant thereto are exempt from federal income taxation under Section 501 of the Code, and, except as disclosed on Schedule 5.16(b), nothing has occurred with respect to the operation of any such plan which would be reasonably likely to cause the loss of such qualification or exemption. (c) All contributions and premiums required by Law or by the terms of any Employee Benefit Plan which is a defined benefit plan or money purchase plan have been timely made (without regard to any waivers granted with respect thereto) to any funds or trusts established thereunder or in connection therewith, and no accumulated funding deficiencies exist in any of such plans. (d) The benefit liabilities, as defined in Section 4001(a)(16) of ERISA, of each of the Employee Benefit Plans subject to Title IV of ERISA using the actuarial assumptions that would be used by the Pension Benefit Guaranty Corporation in the event it terminated each such plan do not exceed the fair market value of the Assets of each such plan. The Liabilities of each Employee Benefit Plan subject to Title IV of 30 ERISA that has been terminated or otherwise wound up have been fully discharged in full compliance with applicable Law. (e) True, correct and complete copies of the following documents, with respect to each of the Employee Benefit Plans, have been delivered or made available to the Purchaser: (i) any plans and related trust documents, and all amendments thereto; (ii) the most recent Forms 5500 and schedules thereto; (iii) the most recent financial statements and actuarial valuations; (iv) the most recent Internal Revenue Service determination letter; and (v) the most recent summary plan descriptions (including letters or other documents updating such descriptions). (f) There are no pending Legal Proceedings which have been asserted or instituted against any of the Employee Benefit Plans, the Assets of any such plans or the Company, or the plan administrator of the Employee Benefit Plans with respect to the operation of such plans (other than routine benefit claims) which would have a Material Adverse Effect and, except as disclosed on Schedule 5.16(f), to the Seller's Knowledge, there are no facts or circumstances which could reasonably be expected to form the basis for any such Legal Proceeding. (g) Except as set forth on Schedule 5.16(g), each of the Employee Benefit Plans has been maintained, in all material respects, in accordance with its terms and all provisions of applicable Law except for such non-compliance which would not have a Material Adverse Effect. All amendments and actions required to bring each of the Employee Benefit Plans into conformity in all material respects with all of the applicable provisions of ERISA and other applicable Laws have been made or taken except to the extent that such amendments or actions are not required by Law to be made or taken until a date after the Closing Date and are disclosed on Schedule 5.16(g). (h) Except as disclosed on Schedule 5.16(h), neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any material payment becoming due to any employee of Company or any of its Subsidiaries; (ii) materially increase any benefits otherwise payable under any Employee Benefit Plan; or (iii) result in the acceleration of the time of payment or vesting of any material compensation or employee benefits. (i) No employee benefit plan maintained by any company affiliated with the Company pursuant to Code Section 414 of the Code that is not an Employee Benefit Plan can reasonably be expected to cause the imposition of any Liability on the Company pursuant to Title IV of ERISA or Section 4980B of the Code. (j) No "reportable event," as such term is defined in Section 4043(b) of ERISA, has occurred with respect to any Employee Benefit Plan which would reasonably be expected to result in any Liability under Title IV of ERISA. 31 5.17 Labor. ----- (a) Except as set forth on Schedule 5.17(a), neither the Company nor any of its Subsidiaries is party to any labor or collective bargaining agreement and there are no labor or collective bargaining agreements which pertain to employees of the Company or any of its Subsidiaries. There is no labor strike, dispute, slowdown or stoppage actually pending, or to the Knowledge of the Seller, threatened against the Company or any of its Subsidiaries. Except as set forth on Schedule 5.17, since January 1, 1997, no labor organization or group of employees of the Company or any of its Subsidiaries has made a demand for recognition, and there have been no representation proceedings or petitions seeking a representation proceeding or, to the Knowledge of the Seller, is any such proceeding or petition threatened to be brought or filed, with the National Labor Relations Board or other labor relations tribunal. (b) Except as set forth on Schedule 5.17(b), neither the Company nor any of its Subsidiaries has received any written notice of any, and to the Seller's Knowledge there is no pending or threatened material labor or employment dispute, grievance or claim, or action with respect to claims of or obligations to, any employees of the Company or any of its Subsidiaries which is disputed or contested by the Company or any of its Subsidiaries. 5.18 Litigation. Except as set forth on Schedule 5.18, there is no ---------- Legal Proceeding pending or, to the Knowledge of the Seller, threatened against the Company or any of its Subsidiaries, or to which the Seller or the Company or any of the Company's Subsidiaries is otherwise a party, before any Governmental Body which, if adversely determined, would individually or in the aggregate have a Material Adverse Effect. To the Seller's Knowledge, except as otherwise disclosed herein or in any schedule to this Agreement, there are no facts or circumstances as of the date hereof that are reasonably likely to result in a Legal Proceeding which if adversely determined would, individually or in the aggregate, have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is subject to any Order of any Governmental Body except to the extent the same would not individually or in the aggregate have a Material Adverse Effect. 5.19 Compliance With Laws. Except as set forth on Schedule 5.19: -------------------- (a) The Company and each of its Subsidiaries are in material compliance with all material Laws applicable to the Company and its Subsidiaries or to the conduct of the business or operations of the Company and its Subsidiaries. The Company and each of its Subsidiaries have all material Permits from Governmental Bodies which are required for the Company and each of its Subsidiaries to operate its business in all material respects. (b) None of the Seller, the Company nor any of the Company's Subsidiaries has received any written notice as of the date hereof of any administrative, civil or criminal investigation or audit by any Governmental Body relating to the Satellite Business (including any qui tam action brought ------- under the Civil False Claims Act alleging 32 any material irregularity, misstatement or omission arising under or relating to any Contract) which have not been resolved. (c) To the Seller's Knowledge, each of the Seller, the Company and the Company's Subsidiaries is in compliance in all material respects with all United States and all foreign export control Laws. The Company has all necessary authority under the export control Laws to conduct the Satellite Business as presently conducted in all material respects including (i) necessary licenses for any export transactions pending as of the date hereof, (ii) necessary licenses and clearances for the disclosure of information to foreign persons and (iii) necessary registrations with United States Governmental Bodies with authority to implement applicable export control Laws. None of the Seller, in relation to the Satellite Business, the Company or the Company's Subsidiaries have participated directly or indirectly in any boycotts or other similar practices in violation of the regulations of the United States Department of Commerce or Section 999 of the Code. (d) As of the date hereof, (i) no suspension or debarment or equivalent proceeding action has been commenced against the Company or any of its Subsidiaries for which the Company or any of its Subsidiaries have received notice thereof, and (ii) to the Seller's Knowledge, there are no facts or circumstances which would reasonably be likely to result in a suspension or debarment proceeding. Neither the Seller, in respect of the Satellite Business, nor the Company or any its Subsidiaries, have made as of the date hereof, a voluntary disclosure initiative to any agency of the United States Government that, as of the date hereof, remains unresolved. (e) To the Seller's Knowledge, the Company and each of its Subsidiaries have complied in all material respects with all applicable federal procurement laws and regulations, including the Truth in Negotiations Act, the Procurement Integrity Act, the Cost Accounting Standards and the Foreign Corrupt Practices Act. (f) To the Seller's Knowledge, the Company has complied in all material respects with facilities and personnel security clearance requirements of the United States, including those set forth in the Industrial Security Regulation (DOD 5220.22-R) and the National Industrial Security Program Operating Manual (DOD 5220.22-M). (g) To the Seller's Knowledge, the Company has complied in all material respects with all of its obligations under applicable United States Contracts relating to any government furnished property or similar property or equipment owned by the United States. 5.20 Environmental Matters. Except as set forth on Schedule 5.20 and --------------------- except for facts, circumstances or conditions that would not have, individually or in the aggregate, a Material Adverse Effect: 33 (a) the Company and each of its Subsidiaries has obtained, currently maintains and, to the Knowledge of the Seller, at all times has maintained all Permits required under all applicable Environmental Laws which are material to the operation of its business; (b) the Company and each of its Subsidiaries are presently, and to the Knowledge of the Seller have at all times been, in material compliance with all applicable Environmental Laws and all Permits issued pursuant to Environmental Laws or otherwise; (c) neither the Company nor any of its Subsidiaries is subject to any pending, notice, letter, claim, or request for information asserting the possibility of the violation of or Liability under any Environmental Law or, to the Seller's Knowledge, threats thereof, and there are no proceedings, actions, orders, decrees, injunctions, or other claims pending, or to the Knowledge of the Seller, threatened, relating to or otherwise alleging liability under any Environmental Law; (d) to the Knowledge of the Seller, there are no pending investigations of the business, operations, or currently or previously owned, operated or leased property of the Company or any of its Subsidiaries which could reasonably be expected to result in the imposition against the Company of any Liability pursuant to Environmental Law; (e) the Seller has made available to the Purchaser all material environmental audits, studies, reports, analyses, and results of investigations that have been performed with respect to the currently or previously owned, leased or operated properties of the Company or any of its Subsidiaries and that are in the Seller's possession, custody or control; (f) to the Knowledge of the Seller, there have been no releases of Hazardous Substances to the soil or groundwater of any properties presently or formerly owned or operated by the Company or any of its Subsidiaries that would reasonably be expected to result in the Company or its Subsidiaries incurring Liability under any Environmental Law; (g) to the Knowledge of the Seller, the Company and each of its Subsidiaries have sent Hazardous Substances for storage, recycling, treatment and/or disposal to offsite locations indicated on Schedule 5.20(g); (h) except as permitted by applicable Permits and Environmental Laws, to the Knowledge of the Seller, neither the Seller nor any of its Subsidiaries have knowingly exposed any employee or third party to any Hazardous Substance that could reasonably be expected to subject the Company or any of its Subsidiaries to Liability under any Environmental Law, which Liability is not or would not be covered by any insurance available to the Company or its Subsidiaries, including workers' compensation and applicable general liability insurance; 34 (i) to the Knowledge of the Seller, none of the currently owned, leased or operated properties of the Company or any of its Subsidiaries, presently contain asbestos-containing material, polychlorinated biphenyls, underground or above-ground storage tanks used for storage of Hazardous Substances; (j) to the Knowledge of the Seller, there have been no underground storage tanks on currently owned or previously owned, leased or operated properties of the Company or any of its Subsidiaries which have created material Liability on the part of the Company or its Subsidiaries; (k) neither the Company nor any of its Subsidiaries has agreed to assume, undertake or provide indemnification for any Liability of any other person under any Environmental Law, including any obligation for corrective or remedial action; (l) the Company and its Subsidiaries are not required as of the date hereof to make any capital expenditures in excess of $500,000 to achieve or maintain compliance with current Environmental Laws and to the Knowledge of the Seller, no Governmental Body has proposed any Environmental Laws as of the date hereof that would reasonably be expected to result in the Company or its Subsidiaries having to make such capital expenditures; (m) to the Knowledge of the Seller, the list of solid waste management units ("SWMUs") and areas of environmental concern ("AECs") and the associated attribution to Defense or the Seller as having created, operated or used those SWMUs and AECs contained in the Environmental Assessment Report for the Building S25 complex and prepared by Environ, dated August 12, 1997, is correct. To the Knowledge of the Seller, the Company and its Subsidiaries have not taken any action or failed to take any action or are not otherwise under any disability that would prevent the Master Separation Agreement, dated as of December 16, 1997, by and among GM, Hughes, Delco Electronics Corporation and Defense (the "MSA") and the Environmental Matters Agreement, dated as of December 17, 1997, by and among GM, Hughes, Delco Electronics Corporation and Defense (the "EMA") from being enforced; and (n) in the event that the Company or its Subsidiaries incurs any environmental Loss at a Company Property or elsewhere which the Purchaser can reasonably demonstrate that Hughes has a right to bring a claim for indemnification of such loss under the MSA and the EMA, Hughes agrees to use its commercially reasonable efforts to assign its rights thereunder to the Purchaser to bring such claim or, if Hughes is unable to assign such rights, Hughes agrees to bring such claim on behalf of the Purchaser using counsel selected and directed by the Purchaser and acceptable to Hughes, which approval Hughes shall not unreasonably withhold. If Hughes pursues such claim on the Purchaser's behalf or otherwise assigns such claim to the Purchaser, the Purchaser will be responsible for all costs and expenses related thereto and will indemnify and hold harmless Hughes and its Affiliates from and against any and all Losses that Hughes or its Affiliates incur in connection therewith. 35 5.21 Insurance. (a) Schedule 5.21(a) sets forth, as of the date --------- hereof, a complete and accurate list of all policies of insurance of any kind or nature covering the Company or any of its Subsidiaries or any of their respective employees, properties or Assets, including policies of life, disability, fire, theft, workers' compensation, employee fidelity and other casualty and liability insurance. All such policies are in full force and effect and the Seller shall use its commercially reasonable efforts to ensure that such policies continue in full force and effect through the Closing Date. The Seller shall use its commercially reasonable efforts to ensure that through the Closing Date no action will be taken to modify such policies in any way which would adversely affect coverage for liabilities assumed by the Purchaser. (b) Schedule 5.21(b) sets forth, as of the date hereof, a complete and accurate list of all current policies of insurance of any kind or nature covering the Company, the Company's Subsidiaries or customers of the Company (where the Company has acted to procure such policy for the benefit of a Subsidiary or other customer), against any risks (including liability to third persons) uniquely associated with, or arising from, the launch, preparation for launch, delivery to orbit, or on-orbit operation, or on-orbit failure, of satellites. For purposes of this Section 5.21, such policies are referred to collectively as "Launch and Space Insurance Policies." To the Seller's Knowledge, all such Launch and Space Insurance Policies are in full force and effect. (c) Schedule 5.21(c) sets forth, as of the date hereof, all claims made by the Company under any Launch and Space Insurance Policy which are pending and unresolved and all claims that are pending and unresolved, as of the date hereof that have been made or threatened in writing by or on behalf of any insurer against it, for refund, credit, reimbursement, offset, repayment, or other form of compensation, in respect to risks or Liabilities as are or were covered by Launch and Space Insurance Policies or subjects of claims made under such policies. 5.22 Inventories; Receivables; Payables. ---------------------------------- (a) The inventories of the Company and its Subsidiaries are in good and marketable condition, and are of a quality and quantity saleable in the ordinary course of business at normal profit margins, except to the extent reserves therefor have been established in the Interim Statement of Assets and Liabilities or that will be established in the Closing Statement of Assets and Liabilities. Adequate reserves have been reflected in the Interim Statement of Assets and Liabilities for obsolete, defective or otherwise unusable inventory, which reserves were calculated in a manner consistent with past practice and in accordance with the accounting practices detailed on Schedule 5.8(b). (b) All accounts receivable of the Company and its Subsidiaries have arisen from bona fide transactions in the ordinary course of business consistent with past practice. All accounts receivable of the Company and its Subsidiaries reflected on the Interim Statement of Assets and Liabilities are good and, to the Seller's Knowledge, collectible at the aggregate recorded amounts thereof, net of any applicable reserve for 36 returns or doubtful accounts reflected thereon, which reserves are adequate and were calculated in a manner consistent with past practice and in accordance with the accounting practices detailed on Schedule 5.8(b). All accounts receivable arising after the Interim Date are good and collectible at the aggregate recorded amounts thereof, net of any applicable reserve for returns or doubtful accounts, which reserves are adequate and were calculated in a manner consistent with past practice and in accordance with the accounting practices detailed on Schedule 5.8(b). (c) All accounts payable of the Company and its Subsidiaries reflected in the Interim Statement of Assets and Liabilities or arising after the date thereof are the result of bona fide transactions in the ordinary course of business and have been paid or are not yet due and payable. 5.23 Intercompany Indebtedness. Except as set forth on Schedule 5.23 ------------------------- and except with respect to obligations under satellite-related contracts between Hughes and its Subsidiaries (other than the Company and its Subsidiaries), on the one hand, and the Company and its Subsidiaries, on the other hand, none of Hughes or any of its Affiliates (other than the Company or its Subsidiaries) has outstanding any borrowed moneys from or outstanding indebtedness or other similar obligations to the Company or any of its Subsidiaries and none of the Company or any of its Subsidiaries has outstanding any borrowed moneys from or outstanding indebtedness or other similar obligations to Hughes or any of its Subsidiaries. 5.24 United States Contracts. Except as set forth on Schedule 5.24, ----------------------- (a) To the Seller's Knowledge, no suspension or debarment action has been commenced against the Company. (b) The Company has not, with respect to any United States Contract, received a final decision of a contracting officer asserting any material claim or material equitable adjustment against the Company by any agency of the United States Government. (c) The Company has not, with respect to any material United States Contract, received any written notice of the intention of any party to terminate the Contract, whether as a termination for convenience or for default, nor any cure notice or "show cause" order advising the Company that it was in default, or would, if it failed to take remedial action, be in default under such Contract. (d) The Company has not, with respect to any material United States Contract, asserted any claim or request for equitable adjustment requesting money, interpretation of Contract terms, or other relief. (e) To the Seller's Knowledge, the Company has fully complied in all material respects with the Truth in Negotiations Act (10 U.S.C. (S)2306a, 41 U.S.C. 37 (S)254(d)) and submitted where required cost or pricing data that was accurate, complete and current. (f) To the Seller's Knowledge, the Company has fully complied in all material respects with all of its obligations under applicable United States Contracts relating to any government furnished property or similar property or equipment owned by the United States. (g) To the Seller's Knowledge, the Company has complied in all material respects with all United States Cost Accounting Standards and has accounted for all United States Contracts in accordance with disclosure statements approved by the United States Government, and has not received written notice from the Defense Contract Management Command of any intent to suspend, disapprove or disallow any material costs. 5.25 Banks. Schedule 5.25 contains a complete and correct list of the ----- names and locations of all banks in which the Company or any of its Subsidiaries has accounts or safe deposit boxes and the names of all persons authorized to draw thereon or to have access thereto. 5.26 Clearances. Except to the extent prohibited by the National ---------- Industrial Security Program Operating Manual, Schedule 5.26 hereto sets forth all facility security clearances held by the Company or any of its Subsidiaries and the number of personnel holding security clearances at each such facility. 5.27 Year 2000 Issues. ---------------- Except as disclosed in Schedule 5.27 and except for matters which would not reasonably be likely to result in a Material Adverse Effect, all date- related output, calculations or results before, during or after the calendar year 2000 that are produced or used by any material hardware, software, firmware or facilities systems relating to the Satellite Business ("Computer Systems") owned or, to the Seller's Knowledge, used by the Seller are Year 2000 Compliant. For purposes of this section, "Year 2000 Compliant" means: (a) all dates receivable by the Computer Systems, as well as calculations, output and results will (i) include a consistent-length century indicator of at least two base ten digits, and (ii) have date elements in interfaces and data storage that will permit specifying the century to eliminate date ambiguity; (b) when any date data is represented without a century, either in an interface or in data storage, the correct century will be unambiguous for all manipulations involving that data; 38 (c) data calculations involving either a single century or multiple centuries will neither (i) cause an abnormal ending or operation nor (ii) generate incorrect results or results inconsistent with output or results from any other century; (d) when sorting by date, all records will be sorted in accurate chronological sequence, and when the date is used as a key, records will be read and written in accurate chronological sequence; and (e) leap years will be determined by the following standard: (i) if dividing the year by 4 yields an integer, it is a leap year, except for years ending in 00, but (ii) a year ending in 00 is a leap year if dividing it by 400 yields an integer. 5.28 Financial Advisors. Except as set forth on Schedule 5.28, no ------------------ Person has acted, directly or indirectly, as a broker, finder or financial advisor for the Seller or the Company in connection with the transactions contemplated by this Agreement and no Person is entitled to any fee or commission or like payment in respect thereof. 5.29 Launch Service Agreements. Schedule 5.29 contains a list of all ------------------------- existing launch services agreements to which the Company or any of its Subsidiaries is a party or by which any of them is bound, other than any such agreements with the Purchaser or its Affiliates, that permit the Company or any of its Subsidiaries to terminate the launch services provided therein without cause, and describes the penalties for the termination of such launch services agreements. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser hereby represents and warrants to Hughes and the Seller that: 6.1 Organization and Good Standing. The Purchaser is a corporation ------------------------------ duly organized, validly existing and in good standing under the laws of the State of Delaware. 6.2 Authorization of Agreement. The Purchaser has all requisite -------------------------- corporate power, authority and legal capacity to execute and deliver this Agreement, the Definitive Agreements to which it is a party and each other agreement, document, instrument or certificate to be executed by the Purchaser in connection with the consummation of the transactions contemplated by this Agreement (such other agreements, documents, instruments or certificates, together with this Agreement and such Definitive Agreements are collectively referred to herein as the "Purchaser Documents"), and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement has been, and each of the other Purchaser Documents will be at or prior to Closing, and the performance of the Purchaser's obligations hereunder and thereunder 39 have been duly authorized by all necessary corporate action by the board of directors and no stockholder approval or other corporate proceedings on the part of the Purchaser are necessary to authorize such execution, delivery and performance. This Agreement has been, and each of the other Purchaser Documents will be at or prior to the Closing, duly and validly executed and delivered by the Purchaser and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and each of the other Purchaser Documents when so executed and delivered will constitute, legal, valid and binding obligations of the Purchaser, enforceable against the Purchaser in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). 6.3 Conflicts; Consents of Third Parties. ------------------------------------ (a) Except as set forth on Schedule 6.3(a) hereto, neither of the execution and delivery by the Purchaser of the Purchaser Documents, nor the compliance by the Purchaser with any of the provisions hereof or thereof will (i) conflict with, or result in the breach of, any provision of the certificate of incorporation or by-laws of the Purchaser, (ii) conflict with, violate, result in the breach of, or entitle any other party thereto to terminate, or accelerate or assert additional material rights under, any Contract to which the Purchaser is a party or by which the Purchaser or its properties or assets are bound or (iii) conflict with or violate any Law of any Governmental Body by which the Purchaser is bound, except, in the case of clauses (ii) and (iii), for such conflicts, violations, breaches or defaults as would not have, individually or in the aggregate, a material adverse effect on the business, properties, results of operations or conditions (financial or otherwise) of the Purchaser and its Subsidiaries taken as a whole. (b) Except for the novation of any United States Contract, filings as may be required under the HSR Act and except as otherwise set forth on Schedule 6.3(b), no Consent of any Person or Governmental Body is required on the part of the Purchaser in connection with the execution and delivery of this Agreement or the other Purchaser Documents, or the compliance by the Purchaser with any of the provisions hereof or thereof. 6.4 Litigation. There are no Legal Proceedings pending or, to the ---------- knowledge of the Purchaser, threatened that are reasonably likely to prohibit or restrain or delay the ability of the Purchaser to enter into this Agreement or consummate the transactions contemplated hereby. 6.5 Investment Intention. The Purchaser is acquiring the Shares for -------------------- its own account, for investment purposes only and not with a view to the distribution (as such term is used in Section 2(11) of the Securities Act of 1933, as amended (the "Securities Act") thereof. The Purchaser understands that the Shares have not been 40 registered under the Securities Act and cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available. 6.6 Financial Capability. The Purchaser will have on the Closing -------------------- Date sufficient funds to purchase the Shares and to consummate the transactions contemplated by this Agreement. 6.7 Financial Advisors. Except as set forth on Schedule 6.7, no ------------------ Person has acted, directly or indirectly, as a broker, finder or financial advisor for the Purchaser in connection with the transactions contemplated by this Agreement and no Person is entitled to any fee or commission or like payment in respect thereof. ARTICLE VII COVENANTS 7.1 Access to Information. --------------------- (a) Without limiting its obligations under any other agreement between or among the parties hereto and/or any of their respective Affiliates relating to confidentiality, each of the parties hereto agrees that it shall not, and shall not permit any of its Affiliates or representatives to, disclose any Confidential Information to any Person, other than to such Affiliates or representatives on a need-to-know basis in connection with the purpose for which the Confidential Information was originally disclosed. Notwithstanding the foregoing, each of the parties hereto and its respective Affiliates and representatives may disclose such Confidential Information to the extent that such party can demonstrate that such Confidential Information is or was (i) available to such party outside the context of the Prior Relationship on a nonconfidential basis prior to its disclosure by the other party, (ii) in the public domain other than by the breach of this Agreement or by breach of any other agreement between or among the parties hereto and/or any of their respective Affiliates relating to confidentiality, or (iii) lawfully acquired outside the context of the Prior Relationship on a nonconfidential basis or independently developed by, or on behalf of, such party by Persons who do not have access to, or description of, any such Confidential Information. The Seller agrees that from and after the date hereof to the Closing Date, it shall maintain any policies and procedures regarding the sharing by the Company's employees of confidential pricing information relating to launch services and the manufacture of satellites with Affiliates of the Company which purchase satellites or launch services from the Company. (b) Each of the parties hereto shall maintain, and shall cause their respective Subsidiaries to maintain, policies and procedures, and develop such further reasonable policies and procedures as shall from time to time become necessary or appropriate, to ensure compliance with this Section 7.1. 41 (c) If any of the parties to this Agreement or any of their respective Affiliates or representatives becomes legally required to disclose any Confidential Information, such disclosing party shall promptly notify the party owning the Confidential Information (the "Owning Party") and shall use all commercially reasonable efforts consistent with such disclosing party's legal requirements to cooperate with the Owning Party so that the Owning Party may seek a protective order or other appropriate remedy and/or waive compliance with this Section 7.1. All expenses incurred by the disclosing party in seeking a protective order or other remedy shall reasonably be borne by the Owning Party. If such protective order or other remedy is not obtained, or if the Owning Party waives compliance with this Section 7.1, the disclosing party or its Affiliate or representative, as applicable, shall (i) disclose only that portion of the Confidential Information which its legal counsel advises it is compelled to disclose consistent with such disclosing party's legal requirements, (ii) use all commercially reasonable efforts to obtain reliable assurance requested by the Owning Party that confidential treatment will be accorded such Confidential Information, and (iii) promptly provide the Owning Party with a copy of the Confidential Information so disclosed, in the same form and format so disclosed, together with a description of all Persons to whom such Confidential Information was disclosed. (d) The Seller agrees that, prior to the Closing Date, the Purchaser shall be entitled, through its officers, employees and representatives to make such investigation of the properties, businesses and operations of the Company and its Subsidiaries, and such examination of the books, records and financial condition of the Company and its Subsidiaries, as it reasonably requests and to make extracts and copies of such books and records. Any Confidential Information provided pursuant to this Section 7.1(d) shall be kept confidential by the Purchaser and shall be subject to the terms of the Confidentiality Agreement. Any such investigation and examination shall be conducted during regular business hours and under reasonable circumstances after appropriate advance notice to the Seller, and the Seller shall cooperate, and shall cause the Company and its Subsidiaries to cooperate, fully therein. 7.2 Conduct of the Business Pending the Closing. ------------------------------------------- (a) Except as otherwise expressly contemplated by this Agreement or with the prior written Consent of the Purchaser, from and after the date hereof to the Closing Date, the Seller shall cause the Company and its Subsidiaries to conduct the business of the Company and its Subsidiaries and the Satellite Business in the ordinary course of business and use commercially reasonable efforts to preserve the present business operations, organization (including management and the sales force) and goodwill of the Company and its Subsidiaries, and the Company will use commercially reasonable efforts to keep available the services of key employees and to preserve the relationships with key customers, suppliers and others having material business dealings with the Company and its Subsidiaries. Moreover, the Seller shall confer at such times as the Purchaser may reasonably request with one or more representatives of the Purchaser to report material operational matters and the general status of ongoing operations (to the extent the Purchaser reasonably requires such information) and shall notify the Purchaser 42 of any material emergency or other material change in the normal course of the Company's or its Subsidiaries' respective businesses or in the operation of the Company's or its Subsidiaries' respective properties and of any material complaints, investigations or hearings (or communications indicating that the same may be contemplated) of any Governmental Body. Without limiting the generality of the foregoing, except as otherwise expressly contemplated by this Agreement or as set forth on Schedule 7.2, from and after the date hereof to the Closing Date, the Seller shall not cause the Company and its Subsidiaries to: (i) other than in the ordinary course of business, declare, set aside, make or pay any dividend or other distribution in respect of the Capital Stock of the Company or any of its Subsidiaries or repurchase, redeem or otherwise acquire any outstanding Capital Stock of the Company or any of its Subsidiaries; (ii) transfer, issue, sell or dispose of any Capital Stock or other securities of the Company or any of its Subsidiaries or grant options, warrants, calls or other rights to purchase or otherwise acquire Capital Stock of the Company or any of its Subsidiaries (other than option grants in the ordinary course of business consistent with past practice); (iii) effect any recapitalization, reclassification, stock split or like change in the capitalization of the Company or any of its Subsidiaries; (iv) propose to amend or amend the certificate of incorporation or by-laws of the Company or any of its Subsidiaries; (v) except in the ordinary course of business (as to employees other than officers of the Company or its Subsidiaries), or as required to comply with applicable Law as set forth in the Employee Matters Agreement attached hereto as Exhibit E (A) materially increase the annual level of compensation of any employee of the Company or any of its Subsidiaries, (B) enter into any new Employee Benefit Plan or amend any Employee Benefit Plan, (C) grant any bonus to any employee, director or consultant or (D) enter into any employment, deferred compensation, severance, retention, consulting, non-competition or similar agreement (or amend any such agreement) to which the Company or any of its Subsidiaries is a party; (vi) except for trade payables and for indebtedness for borrowed money incurred in the ordinary course of business, borrow monies for any reason or draw down on any line of credit or debt obligation, or become the guarantor, surety, endorser or otherwise liable for any Liability (contingent or otherwise) of any other Person (except with respect to performance and financial guarantees, letters of credit or similar credit enhancement rendered by the Company on behalf of its Subsidiaries and except as provided in Section 7.2(a)(xi)); 43 (vii) subject to any Lien (except for Permitted Exceptions and Leases that do not materially impair the use of the property subject thereto in their respective businesses as presently conducted), any of the material assets (whether tangible or intangible) of the Company or any of its Subsidiaries (other than any Lien on work-in-progress assets under any customer finance facility of the Company or any of its Subsidiaries); (viii) acquire any material assets or sell, assign, transfer, convey, lease or otherwise dispose of any of the material assets (except, in each case, for fair consideration in the ordinary course of business consistent with past practice or pursuant to existing contractual obligations) of the Company and its Subsidiaries; (ix) enter into any commitment for capital expenditures of the Company and any of its Subsidiaries not contemplated by the capital expenditure budget of the Company and its Subsidiaries heretofore provided to the Purchaser in excess of $5,000,000; (x) enter into, modify or terminate any labor or collective bargaining agreement of the Company or any of its Subsidiaries or, through negotiation or otherwise, make any commitment or incur any Liability to any labor organization with respect to the Company or any of its Subsidiaries, except in the ordinary course of business; (xi) permit the Company or any of its Subsidiaries to enter into any transaction or to make or enter into any Contract which by reason of its size or otherwise is not in the ordinary course of business (which shall not be deemed to prohibit customary equity investments not exceeding $5 million in the aggregate in customers of the Company or any of its Subsidiaries relating to bidding activities and guarantees entered into in the ordinary course of business); (xii) permit the Company or any of its Subsidiaries to authorize, propose, enter into or agree to enter into any merger, consolidation or business combination with any Person or any acquisition of a material amount of assets or securities, any disposition of a material amount of assets or securities or any release or relinquishment of any material contract rights not in the ordinary course of business; (xiii) commence any litigation or proceeding with respect to any material Tax liability of the Company and its Subsidiaries or settle or compromise any such material Tax liability, in each case, other than Income Tax liabilities, without the Purchaser's consent (which consent shall not be unreasonably withheld); (xiv) change any of its accounting principles, policies, practices or procedures unless required by GAAP; 44 (xv) prepare or file any Tax Return of the Company and its Subsidiaries inconsistent with past practice in preparing or filing similar Tax Returns in prior periods or, on any such Tax Return, take any position, make any election, or adopt any method that is inconsistent with positions taken, elections made or methods used in preparing or filing similar Tax Returns in prior periods, without the Purchaser's consent (which consent shall not be unreasonably withheld), in each case (x) other than with respect to Income Tax Returns, (y) only if and to the extent that any such inconsistent preparation or filing or inconsistent position, election or method would have a material and adverse impact on the Tax liabilities (other than Income Tax liabilities) of the Company and its Subsidiaries for a Post-Closing Taxable Period and (z) except to the extent required by Law; (xvi) make or rescind any express or deemed material election relating to Taxes of the Company and its Subsidiaries without the Purchaser's consent (which consent shall not be unreasonably withheld), other than any such election (x) which relates to an Income Tax liability, (y) which, if made or rescinded, would have a material and adverse impact on the Tax liabilities (other than Income Tax liabilities) of the Company and its Subsidiaries for a Post-Closing Taxable Period or (z) the making or recission of which is required by Law; (xvii) enter into or amend in any material respect any Contract with an Affiliate (other than a Subsidiary) of the Company (except as otherwise contemplated herein); or (xviii) agree in writing or otherwise to do anything prohibited by this Section 7.2 or anything which would make any of the representations and warranties of the Seller in this Agreement or the other Seller Documents untrue or incorrect in any material respect as of any time through and including the Closing Date. 7.3 Consents. Except as contemplated in Section 7.4, the Purchaser -------- and the Seller shall each use its commercially reasonable efforts to obtain all Consents required to consummate the transactions contemplated by this Agreement, including the Consents referred to in Section 5.6(b) hereof; provided, however, -------- ------- that neither the Purchaser nor the Seller shall be obligated to pay any consideration therefor to any Person from whom Consent is requested. In addition to the foregoing, the Seller shall use commercially reasonable efforts to obtain from the landlords under the Leases estoppel certificates from such landlords in form and substance reasonably satisfactory to the Purchaser. 7.4 Filings with Governmental Bodies. As promptly as practicable -------------------------------- after the execution of this Agreement, each party shall, in cooperation with the other, file or cause to be filed any reports, notifications or other information that may be required under the HSR Act, the laws of the European Union and any other Governmental Bodies and shall furnish or cause to be furnished to the other all such information in its possession as may be reasonably necessary for the completion of the reports, notifications 45 or submissions to be filed by the other. Each party hereto agrees to use its best efforts to comply and cause its Affiliates to comply in a full and timely manner with any request from a Governmental Body for additional information. Without limiting the generality of the foregoing, each party will promptly notify the other of the receipt and content of any inquiries or requests for additional information made by any Governmental Body in connection therewith and will promptly (i) comply with any such inquiry or request and (ii) provide the other with a description of the information provided to any Governmental Body with respect to any such inquiry or request. In addition, each party will keep the other apprised of the status of any such inquiry or request. In furtherance of the foregoing, the Purchaser agrees to use its best efforts to take all necessary and proper steps (including any reasonable divestitures) as may be required for securing the termination of any applicable waiting period under the HSR Act or other antitrust Laws in order to permit the consummation of the transactions contemplated hereby prior to the date specified in Section 4.3(a) except to the extent such steps are reasonably likely to materially and adversely affect (x) the reasonably foreseeable benefits to the Purchaser of the transactions contemplated hereby or (y) the existing material business operations of the Purchaser and its Subsidiaries. Each party also agrees to take any action reasonably necessary to vigorously defend, litigate, mitigate and rescind the effect of any litigation or administrative proceeding brought by the Federal Trade Commission or the United States Department of Justice adversely affecting this transaction, including appealing promptly any adverse court of administrative order or injunction or effecting divestitures under the circumstances contemplated above. 7.5 Insurance. --------- (a) From and after the Closing Date, the Company shall be responsible for obtaining and maintaining its own insurance program for operations associated with the Satellite Business. Notwithstanding the foregoing, (i) Hughes, upon the request of the Company, shall use its commercially reasonable efforts to assist the Company in the transition to its own separate insurance coverage from and after the Closing Date, and shall provide the Company with any information that is in the possession of Hughes, which is reasonably available and necessary to either obtain such insurance coverage or to assist the Company in preventing gaps in its insurance coverage; (ii) Hughes, upon the Company's request, shall cooperate with and use its commercially reasonable efforts to assist the Company in the assertion, perfection and collection of any proceeds to which it, or any of its Subsidiaries, may be entitled under any insurance policy in effect prior to the Closing Date, including causing the Company and the Purchaser to be named as additional insureds on all policies identified on Schedules 5.21(a) and (b) in order that the Company may directly assert claims under and collect proceeds of any insurance policy in effect prior to the Closing Date; (iii) the Seller shall provide the Purchaser and the Company complete and unlimited access to insurance policies listed on Schedules 5.21(a) and (b) to the extent such insurance policies apply to liabilities which occurred prior to the Closing Date; (iv) Hughes shall not intentionally take any affirmative action that would jeopardize or otherwise interfere with the Company's ability to collect any proceeds payable pursuant to any insurance policy in effect prior to the Closing Date and 46 (v) the Seller agrees to use commercially reasonable efforts to assist the Purchaser in asserting, defending or perfecting claims with insurers where such claims relate to the events, acts or omissions of the Company which occurred prior to or on the Closing Date. The Purchaser acknowledges and agrees that with respect to any Liabilities relating to the Satellite Business that are covered by insurance, whether or not such Liabilities arose out of events, acts or omissions which occurred prior to the Closing Date, the Company shall have responsibility for all claims arising thereunder. (b) The Company or its Subsidiaries shall provide Hughes and its Subsidiaries with insurance underwriting assistance (including obtaining or maintaining insurance coverage, responding to inquiries from insurance underwriters and obtaining any consents or approvals required to provide such insurance underwriting assistance) in connection with any launch, on-orbit or similar services provided or approved by Hughes and its Subsidiaries for satellites manufactured by the Company or any of its Subsidiaries. Subject to the terms of the transition services agreement to be entered into as a Definitive Agreement on the Closing Date, such assistance shall be consistent with that which would be provided to other customers for satellites manufactured by the Company or any of its Subsidiaries. (c) Hughes shall use commercially reasonable efforts to deliver to the Purchaser prior to the Closing Date, and to the extent they are available, complete, true and accurate copies of all policies listed on Schedule 5.21(a), and Schedule 5.21(b) where the Company is the named insured. 7.6 Novations and Other Transfers. ----------------------------- (a) As promptly as practicable after the execution of this Agreement, the Purchaser and the Seller shall apply for any novations (the "Novations") that may be required with respect to the United States Contracts applicable to the Satellite Business. The Purchaser and the Seller shall act diligently and reasonably, and shall cooperate with each other, to secure the Novations, if required, and shall cooperate so that the Purchaser receives the benefit of such United States Contracts pending the receipt of such Novations. With respect to such United States Contracts in the name of Hughes Aircraft Company and related entities that were part of Hughes' former defense business, Purchaser shall execute any necessary Novations directly with the United States Government and Raytheon Company. (b) Each party shall exercise its commercially reasonable efforts to effectuate a transfer of the Permits listed on Schedule 5.6(b). In furtherance of the foregoing, each party shall prepare the required transmittal letters to the United States Department of State and shall concurrently submit the letters to the Department of State within the time periods required by law. 7.7 Other Actions. (a) Each of the Seller and the Purchaser shall ------------- use its commercially reasonable efforts to (i) take all actions necessary or appropriate to consummate the transactions contemplated by this Agreement and (ii) cause the 47 fulfillment at the earliest practicable date of all of the conditions to their respective obligations to consummate the transactions contemplated by this Agreement. (b) With respect to those representations and warranties contained in Sections 5.10, 5.11(c), 5.19(b) and 5.19(d) that are expressly made only as of the date hereof, the Seller agrees that if to the Seller's Knowledge, events have occurred after the date hereof and prior to the Closing Date that the Seller would have been required to include on the applicable schedule referred to in the section containing such representation if such event had occurred prior to the date hereof, the Seller shall advise the Purchaser thereof. The parties agree that neither the occurrence of any such event nor the advising of the Purchaser thereof will be deemed to be a breach of the applicable representation or warranty. 7.8 No Solicitation. --------------- (a) The Seller shall not, and shall not cause or permit the Company or any of its Subsidiaries, or any of their directors, officers, employees, representatives or agents (collectively, the "Representatives") to, directly or indirectly, (i) discuss, negotiate, undertake, authorize, assist, participate in, recommend, propose or enter into, either as the proposed surviving, merged, acquiring or acquired corporation, any transaction involving a merger, consolidation, business combination, purchase or disposition of any amount of the Assets or Capital Stock or other equity interest in the Company or any of its Subsidiaries other than the transactions contemplated by this Agreement (an "Acquisition Transaction"), (ii) facilitate, encourage, solicit or initiate discussions, negotiations or submissions of proposals or offers in respect of an Acquisition Transaction, (iii) furnish or cause to be furnished, to any Person, any information concerning the business, operations, properties or Assets of the Company or any of its Subsidiaries in connection with an Acquisition Transaction, or (iv) otherwise assist or participate in, facilitate or encourage, any effort or attempt by any other Person to do or seek any of the foregoing. The Seller shall promptly inform the Purchaser following the receipt by the Seller, the Company or any Representative thereof of any proposal in respect of any Acquisition Transaction. (b) Beginning as of the date hereof and continuing through the date that is one year following the Closing Date, the Purchaser and its Subsidiaries shall not directly or indirectly, except by means of a general public solicitation, or by retaining an executive recruiting firm that it has not directed to approach employees of Hughes or its Subsidiaries, solicit, encourage, entice or induce any Person who is an employee of Hughes or its Subsidiaries to terminate his or her employment with Hughes or such Subsidiary. The Purchaser agrees that money damages will not be an adequate remedy and that the Seller shall be entitled to equitable relief, including injunction, in the event of any breach by the Purchaser or its Subsidiaries of this Section 7.8(b), in addition to any other remedies available to the Seller at Law; provided, -------- however, that nothing in this Section 7.8(b) shall restrict the Purchaser or its - ------- Subsidiaries from soliciting employees of Hughes or its Subsidiaries on the date hereof or at any time hereafter who are terminated by their respective employers, or have voluntarily resigned prior to any such solicitation. 48 Notwithstanding the foregoing, the Purchaser and its Subsidiaries shall be permitted to offer employment to those employees consented to by Hughes which consent will not be unreasonably withheld. (c) Beginning as of the date hereof and continuing through the date that is one year following the Closing Date, Hughes and its Subsidiaries shall not directly or indirectly, except by means of a general public solicitation or by retaining an executive recruiting firm that it has not specifically directed to approach employees of the Purchaser or its Subsidiaries, solicit, encourage, entice or induce any Person who is an employee of the Purchaser or its Subsidiaries to terminate his or her employment with the Purchaser or its Subsidiaries. Hughes agrees that money damages will not be an adequate remedy and that the Purchaser shall be entitled to equitable relief, including injunction, in the event of any breach by Hughes or its Subsidiaries of this Section 7.8(c), in addition to any other remedies available to the Purchaser at Law; provided, however, that nothing in this Section 7.8(c) shall restrict -------- ------- Hughes or its Subsidiaries from soliciting employees of the Purchaser or its Subsidiaries on the date hereof or at any time hereafter who are terminated by their respective employers or have voluntarily resigned prior to any such solicitation. Notwithstanding the foregoing, Hughes or its Subsidiaries shall be permitted to offer employment to those employees consented to by the Purchaser, which consent will not be unreasonably withheld. 7.9 Preservation of Records. Subject to Section 11.5(c) hereof ----------------------- (relating to the preservation of Tax records), the Seller and the Purchaser agree that each of them shall preserve and keep the records held by it relating to the business of the Company and its Subsidiaries for a period of ten years from the Closing Date in accordance with their respective corporate records retention policies; provided, however, that prior to disposing of any such -------- ------- records in accordance with such policies, the parties hereto shall provide written notice to the other party of its intent to dispose of such records and shall provide such other party the opportunity to take ownership and possession of such records (at such other party's sole expense) within 90 days after such notice is delivered. If such other party does not confirm its intention in writing to take ownership and possession of such records within such 90-day period, the party who possesses the records may proceed with the disposition of such records. Written notice of intent to dispose of records shall include a description of the records in detail sufficient to allow the other party to reasonably assess its potential need to retain such records. At a minimum, the description shall include the organization that generated or received the records, the type of records, the contract number or program name to which the records pertain (if applicable), and the dates of the records. The Seller and the Purchaser shall make such records available to the other as may be reasonably required by such party in connection with, among other things, any insurance claims by, Legal Proceedings against or governmental investigations of the Seller or the Purchaser or any of their Affiliates or in order to enable the Seller or the Purchaser to comply with their respective obligations under this Agreement and each other agreement, document or instrument contemplated hereby or thereby. 49 7.10 Publicity. Neither the Seller nor the Purchaser shall issue any --------- press release or public announcement concerning this Agreement or the transactions contemplated hereby without obtaining the prior written approval of the other party hereto, which approval will not be unreasonably withheld or delayed, unless, in the reasonable judgment of the Purchaser or the Seller, disclosure is otherwise required by applicable Law or by the applicable rules of any stock exchange on which the Purchaser, Hughes or Hughes' parent corporation lists its securities; provided that, to the extent required by applicable Law or -------- by the rules of any stock exchange, the party intending to make such release or announcement shall use its commercially reasonable efforts consistent with such applicable Law to consult with the other party with respect to the text thereof. 7.11 Non-Competition Agreements. -------------------------- (a) Except for those activities currently contemplated in the Purchaser's business plan, as identified on Schedule 7.11, the Purchaser agrees that for a period of three years from and after the Closing Date, neither it nor its Subsidiaries will (1) themselves develop, own or make any financial investments in (directly or indirectly) a Competitive Commercial Satellite -- System (defined as a system that would be in direct competition with the PanAmSat and/or Spaceway systems, a "Competitive Commercial Satellite System"), or (2) manage, control or operate any Competitive Commercial Satellite System except as part of an integrated product offering to a customer where the commercial satellite services component represents less than 20% of the total revenues to the Purchaser for such integrated product from such customer and is not supplied by Purchaser or its Affiliates (but instead is procured from an unrelated third party) ; provided, however, that nothing herein shall prohibit: ------- (i) any investment of less than 5% of the equity securities (as determined at the time of investment) in a Person if the Purchaser does not actively participate in the management, supervision or conduct of such Person, whether through membership or participation in such Person's board of directors, governing committee, management or otherwise; (ii) any acquisition by the Purchaser of another Person which is engaged in a Competitive Commercial Satellite System, if such Competitive Commercial Satellite System represents less than one-fifth of such Person's revenues and less than one-fifth of such Person's Assets, and if the Purchaser either (i) acts diligently to divest such Competitive Commercial Satellite System in a commercially reasonable manner; or (ii) enters into appropriate arrangements reasonably satisfactory to Hughes to assure that it will not participate in the management, supervision or conduct of such Person in any manner referred to in clause (i) above; or (iii) any investment of up to 20% in another Person if the Purchaser (i) determines in good faith that such investment is primarily motivated by the receipt by the Purchaser or one of its Affiliates, or a reasonable expectation that 50 the Purchaser or one of its Affiliates will receive, a contract of significance (in relation to the amount of the investment) for the provision of goods and/or services, to such Person and (ii) enters into appropriate arrangements reasonably satisfactory to Hughes to assure that it will not participate in the management, supervision or conduct of the business of such Person; provided that no such arrangement shall be -------- necessary if the Purchaser's participation is limited to activities that directly affect the Purchaser's performance as a provider of goods and/or services to such Person and the Purchaser maintains appropriate firewalls and similar measures designed to ensure that any information that the Purchaser receives from such participation is not used by the Purchaser to engage, directly or indirectly, in a Competitive Commercial Satellite System. Except for any existing commitments, where a commercial satellite can be employed in pursuit of those activities currently contemplated in the Purchaser's business plan as identified on Schedule 7.11, Purchaser agrees that for a period of three years from and after the Closing Date, it will and it will use its commercially reasonable efforts to cause its Subsidiaries to consider contracting with Hughes or its Affiliates as supplier of such commercial satellite services, which consideration would take into account such matters as the relevant party's fiduciary duties, as well as customary commercial considerations as to price, delivery schedule, quality and other appropriate matters. The final determination in each case shall be subject to the approval of the board of directors or appropriate officers of such entity. In addition, except for those activities currently contemplated in the Purchaser's business plan, as identified on Schedule 7.11, the Purchaser acknowledges those certain non-competition provisions binding on the Company and its subsidiaries that are included in the contract with Hughes' HNS division regarding the establishment of the Spaceway system. (b) Hughes agrees that for a period of three years from and after the Closing Date, neither Hughes nor its Subsidiaries will engage or participate in, or make any financial investments in (directly or indirectly) any Person which engages directly or indirectly in the business of, manufacturing satellites for commercial customers or government agencies; provided, however, that nothing -------- ------- herein shall prohibit: (i) any investment of less than 5% of the equity securities (as determined at the time of investment) in a Person if Hughes does not actively participate in the management, supervision or conduct of such Person, whether through membership or participation in such Person's board of directors, governing committee, management or otherwise; or (ii) any acquisition by Hughes of another Person which is engaged in a business of manufacturing satellites for commercial customers or government agencies, if such activities represents less than one-fifth of such Person's revenues and less than one-fifth of such Person's assets, and if Hughes either (i) acts diligently to divest such activities in a commercially reasonable manner; or 51 (ii) enters into appropriate arrangements reasonably satisfactory to the Purchaser to assure that it will not participate in the management, supervision or conduct of such Person in any manner referred to in clause (i) above. (c) Each party hereto acknowledges that in the event of its or its Subsidiaries' breach of the covenants contained in this Section 7.11, money damages would be an inadequate remedy. Accordingly, without prejudice to the rights of any party also to seek such damages or other remedies available to it, any party may seek, and the other party shall not contest the appropriateness of the availability of, injunctive or other equitable relief in any proceeding which such first party may bring to enforce the covenants contained in this Section 7.11. (d) Hughes and the Purchaser agree that, if any provision of this Section 7.11 should be adjudicated to be invalid or unenforceable, such provision shall be deemed deleted herefrom with respect, and only with respect, to the operation of such provision in the particular jurisdiction in which such adjudication was made. To the extent any such provision may be valid and enforceable in such jurisdiction by limitations on the scope of the activities, geographical area or time period covered, the Purchaser and Hughes agree that such provision instead shall be deemed limited to the extent, and only to the extent, necessary to make such provision enforceable to the fullest extent permissible under the Laws and public policies in such jurisdiction. 7.12 Guarantees and Letters of Credit. The Purchaser shall (i) -------------------------------- substitute itself or an Affiliate for Hughes with respect to (and cause Hughes to be released from) the financial and performance guarantees delivered by Hughes prior to the Closing Date in connection with the operation of the Satellite Business, including those identified on Schedule 7.12, and (ii) cause to be issued letters of credit as replacement letters of credit for ones issued by Hughes prior to the Closing Date in connection with the operation of the Satellite Business, including those letters of credit in the amount and for the beneficiaries identified on Schedule 7.12. Schedule 7.12 sets forth all of such financial performance guarantees and letters of credit that are outstanding as of the date hereof. 7.13 Sublease for Shared Facilities. The parties hereto agree to ------------------------------ execute and deliver on or prior to the Closing Date a sublease for the facility identified on Schedule 7.13. Pursuant to the sublease, Hughes will sublease from the Company the space currently occupied by Hughes employees for a term of two years after the Closing Date. The subtenant may terminate the sublease at any time upon not less than 90 days prior written notice. The subtenant will pay a pro rata share, based on the number of square feet occupied, of the rent and operating expenses paid by the Company. Otherwise, the sublease will contain mutually agreeable terms and conditions consistent with the prime lease. 7.14 Guarantee of Performance. ------------------------ (a) With respect to those Contracts existing as of the Closing Date between Hughes and its Subsidiaries, on the one hand, and Subsidiaries of the Company, 52 on the other hand, including those Contracts listed on Schedule 7.14, the Purchaser agrees that from and after the Closing Date, it shall cause the Company to guarantee the performance of such Subsidiaries under such Contracts. (b) With respect to all of the obligations of the Seller hereunder, Hughes agrees that it shall cause the Seller to perform such obligations and it hereby further agrees to guarantee the performance by the Seller of such obligations, and to be liable as a primary obligor thereon. 7.15 Access. Upon reasonable advance notice from the Purchaser, the ------ Seller shall (i) during ordinary business hours and as long as it would not cause undue business interruption, permit the Purchaser and its authorized representatives to have access to the Company Properties in order to make such reasonable inspections and investigations as the Purchaser shall deem appropriate, and (ii) furnish as soon as reasonably practicable to the Purchaser or its authorized representatives such other reasonable information as may be reasonably available with respect to the Company Properties as the Purchaser may from time to time reasonably request. The Purchaser shall not be entitled to perform any invasive action, testing or drilling without prior notice to and consent of the Seller, which Consent is not to be unreasonably withheld or delayed. The Purchaser shall immediately repair any and all damage resulting from the acts or omissions of the Purchaser or its agents, employees, contractors or representatives relating to such inspections, tests and investigations of the Company Properties. 7.16 Certain Notices. If required under the Workers Adjustment and --------------- Retraining Notification Act or other applicable state Law regulating plant closing or mass layoffs, the Company and each of its Subsidiaries shall cause there to be filed or distributed, as appropriate, all required filings and notices with respect to employment Losses occurring through the Closing Date. 7.17 Preferred Provider. Hughes agrees that for a period of five years ------------------ from and after the Closing Date, it will, and it will use its commercially reasonable efforts to cause its Subsidiaries to consider contracting with the Company as supplier with respect to the satellite manufacturing requirements of such entity, which consideration would take into account such matters as the relevant party's fiduciary duties, as well as customary commercial considerations as to price, delivery schedule, quality and other appropriate matters. The final determination in each case shall be subject to the approval of the board of directors or appropriate officers of such entity. 7.18 On Orbit Incentives. Not more than 60 days prior to the Closing ------------------- Date, Hughes shall cause to be performed a "monte carlo analysis" using the most recently available data (the "Closing Analysis") to determine the appropriate level of reserves with respect to on-orbit incentives of the Company and its Subsidiaries. The Closing Analysis will be conducted using methods and assumptions consistent with those used in the most recently completed monte carlo closing analysis. The Closing Statement of Assets and Liabilities will reflect the level of reserves established by the Closing Analysis. 53 7.19 Thuraya. Hughes and the Seller agree to cause to be executed and ------- delivered on or prior to the Closing Date a definitive agreement that incorporates the existing memorandum of understanding (the "MOA") between Hughes' HNS division ("HNS") and the Company regarding the existing contract between Thuraya and a Subsidiary of the Company (the "Thuraya Contract"), modified in order to reflect changes needed to convert the responsibilities of HNS to those appropriate for a subcontractor and to convert the responsibilities of the Company and its Subsidiaries to those appropriate for the prime contractor. The material modifications contemplated by the preceding sentence are described on Schedule 7.19. The definitive agreement shall be consistent with Schedule 7.19 and in all other respects in form and substance reasonably satisfactory to the Purchaser and the Seller. 7.20 Spaceway. (a) Hughes and the Seller agree to cause to be -------- executed and delivered on or prior to the Closing Date an amendment to the Spaceway contract between HNS and the Company (the "Spaceway Contract") that implements the following modifications to the non-competition provisions set forth therein: (i) If the Company contracts with Hughes to manufacture satellites for a non-U.S. regional Spaceway system, the non-competition provisions set forth therein will expire on April 1, 2006, as currently provided therein; (ii) If the Company is not selected by Hughes to manufacture satellites for a non-U.S. regional Spaceway system or if Hughes elects not to proceed with a non-U.S. regional Spaceway system, the non-competition provisions set forth therein will expire on the later of (y) April 1, 2005 and (z) 24 months from final acceptance of the Spaceway constellation, but in no event later than April 1, 2006. (b) In addition, the non-competition provisions set forth in the Spaceway Contract will be amended to provide that such provisions are inapplicable to those activities currently contemplated in the Purchaser's business plan as identified on Schedule 7.11. ARTICLE VIII CONDITIONS TO CLOSING 8.1 Conditions Precedent to Obligations of Each Party. The respective ------------------------------------------------- obligations of the Purchaser and the Seller to consummate the transactions contemplated by this Agreement are subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions: (a) any required waiting period (including any extension thereof) applicable to the purchase and sale of the Shares to the Purchaser under the HSR Act and the laws of the European Union shall have terminated or expired; 54 (b) there shall not be in effect any Order by a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby; (c) the Transfers shall have been consummated in accordance with the terms of the Transfer Documents; (d) the Definitive Agreements shall have been duly executed and delivered; (e) the sublease contemplated in Section 7.13 shall have been duly executed and delivered; (f) the definitive agreement incorporating the MOA, modified as contemplated in Section 7.19 , shall have been duly executed and delivered; and (g) the amendment to the Spaceway Contract as contemplated in Section 7.20 shall have been duly executed and delivered. 8.2 Conditions Precedent to Obligations of the Purchaser. The ---------------------------------------------------- obligation of the Purchaser to consummate the transactions contemplated by this Agreement is subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by the Purchaser in whole or in part to the extent permitted by applicable Law): (a) all representations and warranties of the Seller contained herein shall be true and correct at and as of the Closing Date with the same effect as though those representations and warranties had been made again at and as of that time, unless the failure of such representations to be true and correct, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect, except with respect to those representations and warranties made as of a particular time which must be true and correct in the manner contemplated above as of such time; (b) the Seller shall have performed and complied with all obligations and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date unless the failure to perform or comply with such obligations and covenants individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect; (c) the Purchaser shall have been furnished with a certificate (dated the Closing Date and in form and substance reasonably satisfactory to the Purchaser) executed by a principal executive officer and the chief financial officer of the Seller certifying as to the fulfillment of the conditions specified in Sections 8.2(a) and 8.2(b) hereof; 55 (d) certificates representing the Shares shall have been, or shall at the Closing be, validly delivered and transferred to the Purchaser, free and clear of any and all Liens; (e) there shall not have been or occurred any Material Adverse Change; (f) the Seller shall have provided the Purchaser with an affidavit of non-foreign status that complies with Section 1445 of the Code (a "FIRPTA Affidavit"); (g) the Seller shall have obtained all Consents referred to on Schedule 8.2(g) (the "Seller Necessary Consents"), in a form reasonably satisfactory to the Purchaser, with respect to the transactions contemplated by this Agreement and the Seller Documents; 8.3 Conditions Precedent to Obligations of the Seller. The ------------------------------------------------- obligations of the Seller to consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions (any or all of which may be waived by the Seller in whole or in part to the extent permitted by applicable Law): (a) all representations and warranties of the Purchaser contained herein qualified as to materiality or material adverse effect shall be true and correct, and all representations and warranties of the Purchaser contained herein not qualified as to materiality shall be true and correct in all material respects, at and as of the Closing Date with the same effect as though those representations and warranties had been made again at and as of that date; (b) the Purchaser shall have performed and complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Purchaser on or prior to the Closing Date; and (c) the Seller shall have been furnished with a certificate (dated the Closing Date and in form and substance reasonably satisfactory to the Seller) executed by a principal executive officer and the chief financial officer of the Purchaser certifying as to the fulfillment of the conditions specified in Sections 8.3(a) and 8.3(b). ARTICLE IX DOCUMENTS TO BE DELIVERED 9.1 Documents to be Delivered by the Seller. At the Closing, the --------------------------------------- Seller shall deliver, or cause to be delivered, to the Purchaser the following: (a) stock certificates representing the Shares, duly endorsed in blank or accompanied by stock transfer powers; 56 (b) the certificate referred to in Section 8.2(c) hereof; (c) copies of all Seller Necessary Consents; (d) copies of the Transfer Documents, duly executed by the parties thereto; (e) copies of the Definitive Agreements and the sublease contemplated by Section 7.13, duly executed by the Seller and/or the Company, as the case may be; (f) a duly executed FIRPTA Affidavit for the Seller; (g) certificates of good standing with respect to the Company issued by the Secretary of State of the State of Delaware and for each state in which the Company is qualified to do business as a foreign corporation; and (h) such other customary closing documents as the Purchaser shall reasonably request. 9.2 Documents to be Delivered by the Purchaser. At the Closing, the ------------------------------------------ Purchaser shall deliver to the Seller the following: (a) evidence of the wire transfers referred to in Section 3.1 hereof; (b) the certificate referred to in Section 8.3(c) hereof; (c) copies of the Definitive Agreements and the sublease contemplated by Section 7.13, duly executed by the Purchaser; (d) evidence of the issuance of the guarantees (and release of Hughes) and the letters of credit contemplated by Section 7.14; and (e) such other customary closing documents as the Seller shall reasonably request. ARTICLE X INDEMNIFICATION 10.1 Non-Income Tax Indemnification. ------------------------------ (a) Subject to the other provisions of this Article X, and the provisions of Article XII and, except as otherwise provided by Article XI, the Seller and Hughes hereby agree to jointly and severally indemnify and hold the Purchaser, the Company, and their respective directors, officers, employees, Affiliates, agents, successors and 57 assigns (collectively, the "Purchaser Indemnified Parties") harmless from and against any and all Losses based upon, attributable to or resulting from: (i) the failure of any representation or warranty of the Seller or Hughes set forth in Article V hereof or in the Definitive Agreements, or the agreement contained in Section 7.7(b), or any representation or warranty contained in any certificate delivered by or on behalf of the Seller pursuant to this Agreement, to be true and correct in all respects as of the date made; (ii) the breach of any covenant or other agreement on the part of the Seller under any of the Seller Documents (other than the agreement contained in Section 7.7(b)); (iii) the Excluded Assets; or (iv) any claim arising from the litigation currently pending between (x) Raytheon Company and Towers, Perrin and (y) Hughes and Towers, Perrin. (b) Subject to the other provisions of this Article X, and the provisions of Article XII, the Purchaser hereby agrees to indemnify and hold the Seller and its directors, officers, employees, Affiliates, agents, successors and assigns (collectively, the "Seller Indemnified Parties") harmless from and against any and all Losses based upon, attributable to or resulting from: (i) the failure of any representation or warranty of the Purchaser set forth in Article VI hereof or in the Definitive Agreements, or any representation or warranty contained in any certificate delivered by or on behalf of the Purchaser pursuant to this Agreement, to be true and correct as of the date made; (ii) the breach of any covenant or other agreement on the part of the Purchaser under any of the Purchaser Documents; (iii) the breach of any covenant or other agreement on the part of the Company under any of the Definitive Agreements to which it is a party; (iv) all Liabilities of the Company and its Subsidiaries (including all Liabilities relating to the Satellite Business) and all Liabilities relating to or associated with the Shares, in each case, whether such Liabilities arose prior to or arise on or after the Closing Date; or (v) the Additional Satellite Liabilities, whether such Liabilities arose prior to or arise on or after the Closing Date. (c) The parties hereto acknowledge and agree that any matter that is subject to, or a matter considered for, resolution by the Accounting Arbitrator pursuant to Section 3.2 (which, for purposes of clarity, shall include all matters reflected on the Closing Statement of Net Assets) shall not be the basis of an indemnification claim under 58 Articles X or XI, to the extent, but only to the extent, that such matter did result in, or assuming such matter was valid and was properly raised in the course of the purchase price adjustment provision of Section 3.2, could have resulted in, an adjustment in the Closing Net Assets. 10.2 Certain Limitations. ------------------- (a) An indemnifying party shall not have any liability under Section 10.1(a)(i) or Section 10.1(b)(i) hereof, as the case may be (other than with respect to the representations and warranties in Sections 5.3, 5.7(a), 5.28 and 6.7) until the aggregate amount of Losses actually incurred by the indemnified parties with respect to all claims shall exceed $30,000,000 (the "Basket"), in which event, the indemnifying party shall be required to pay the entire amount of such Losses in excess of the Basket. Claims made pursuant to the representations and warranties contained in or made pursuant to Sections 5.3, 5.7(a), 5.28 and 6.7 hereof will not be subject to the Basket. In addition to the foregoing, except for Losses arising out of, attributable to or resulting from any breach of the representations and warranties in Sections 5.3, 5.7(a), 5.28 and 6.7, the maximum aggregate amount of Losses for which indemnity with respect to breaches of representations and warranties may be sought shall be $1,800,000,000. (b) Subject to the provisions of Section 3.2 and Article XI, in each case with respect to the matters covered thereby, the parties hereto agree that except as expressly set forth to the contrary in any Definitive Agreement the indemnification and other provisions set forth in this Article X shall be the sole and exclusive remedy of the Purchaser against the Seller arising out of this Agreement or the Definitive Agreements, including with respect to any dispute that may arise under any Definitive Agreement. Notwithstanding the foregoing, nothing herein shall eliminate the availability to the parties of any equitable remedies or the availability of Section 14.3 for a declaration of the rights of the parties with respect to any dispute that may arise under this Agreement or the Definitive Agreements. 10.3 Non-Income Tax Indemnification Procedures. ----------------------------------------- (a) In the event that any Legal Proceedings shall be instituted or that any claim or demand ("Claim") shall be asserted by any Person in respect of which payment may be sought under Section 10.1 hereof (regardless of the Basket referred to above), the indemnified party shall reasonably and promptly cause written notice of the assertion of any Claim of which it has knowledge which is covered by this indemnity to be forwarded to the indemnifying party; provided, -------- however, that delay or failure in the giving of any such notice shall not - ------- relieve the indemnifying party of its obligations hereunder, except to the extent that it suffers actual prejudice as the result of such failure or delay. The indemnifying party shall have the right, at its sole option and expense, to be represented by counsel of its choice, which must be reasonably satisfactory to the indemnified party, and to defend against, negotiate, settle or otherwise deal with any Claim which relates to any Losses indemnified against hereunder. If the indemnifying party elects to defend against, negotiate, settle or otherwise deal with any Claim which 59 relates to any Losses indemnified against hereunder, it shall within ten days from receipt of the indemnified party's written notice notify the indemnified party of its intent to do so. If the indemnifying party elects not to defend against, negotiate, settle or otherwise deal with any Claim which relates to any Losses indemnified against hereunder, fails to notify the indemnified party of its election as herein provided or contests its obligation to indemnify the indemnified party for such Losses under this Agreement, the indemnified party may defend against, negotiate, settle or otherwise deal with such Claim. If the indemnified party defends any Claim, then the indemnifying party shall reimburse the indemnified party for the reasonable expenses of defending such Claim upon submission of periodic bills. If the indemnifying party shall assume the defense of any Claim, the indemnified party may participate, at his or its own expense, in the defense of such Claim; provided, however, that such indemnified party -------- ------- shall be entitled to participate in any such defense with separate counsel at the expense of the indemnifying party if (i) so requested by the indemnifying party to participate or (ii) in the reasonable opinion of counsel to the indemnified party, a conflict or potential conflict exists between the indemnified party and the indemnifying party that would make such separate representation advisable; and provided, further, that the indemnifying party -------- ------- shall not be required to pay for more than one such counsel for all indemnified parties in connection with any Claim. The parties hereto agree to cooperate fully with each other in connection with the defense, negotiation or settlement of any such Claim. (b) After any final judgment or award shall have been rendered by a court, arbitration board or administrative agency of competent jurisdiction and the expiration of the time in which to appeal therefrom, or a settlement shall have been consummated, or the indemnified party and the indemnifying party shall have arrived at a mutually binding agreement with respect to a Claim hereunder, the indemnified party shall forward to the indemnifying party notice of any sums due and owing by the indemnifying party pursuant to this Agreement with respect to such matter and the indemnifying party shall be required to pay all of the sums so due and owing to the indemnified party by wire transfer of immediately available funds within 10 Business Days after the date of such notice. (c) The failure of the indemnified party to give reasonably prompt notice of any Claim shall not release, waive or otherwise affect the indemnifying party's obligations with respect thereto except to the extent that the indemnifying party can demonstrate actual loss and prejudice as a result of such failure. 10.4 Employee Benefits and Labor Indemnity. The Seller and Hughes ------------------------------------- hereby agree to jointly and severally indemnify and hold the Purchaser Indemnified Parties harmless from and against any and all Losses arising out of or based upon or with respect to any Employee Benefit Plan subject to Title IV of ERISA and solely by reason of the Company being included as a member of a group under common control or treated as a single employer with the Seller prior to the Closing Date. 10.5 China Investigation. ------------------- 60 (a) Prior to the Closing, Hughes shall endeavor in good faith to reach a final settlement with the United States Government (or applicable Governmental Body) with regard to the investigation involving the Company's activities in the People's Republic of China publicly disclosed by Hughes prior to the date hereof together with any other compliance matters related to exports by the Company to China prior to the Closing (all such matters being collectively referred to as the "China Investigation") on such basis as Hughes determines to be appropriate, provided, however, that (i) Hughes shall bear responsibility for the full amount of any monetary fines and/or penalties agreed to by the Company and (ii) in connection with any such settlement (whether or not such settlement includes a guilty plea by the Company to one or more criminal charges), the Satellite Business shall be deemed to have suffered a Material Adverse Change if such settlement involves a debarment (as regards sales to the United States Government) or material suspension of export licenses or other material limitation on the future business activities of the Satellite Business provided, however, that the Satellite Business shall be deemed not to have suffered a Material Adverse Change if such settlement only involves a suspension of licenses or other limitation on business activity restricting sales to the People's Republic of China or to any other customer or country for which material sales are not included in the current business plan of the Company (as heretofore provided to the Purchaser). (b) If Hughes is unable to reach a settlement of the China Investigation prior to the Closing, then Hughes will provide Purchaser and its legal counsel with a full briefing pursuant to the common interest and joint defense privilege of Purchaser as to the status of the matter. Hughes shall also consult with Purchaser on a regular basis concerning strategy and tactics being considered by Hughes in connection with the resolution of the matter and will advise Purchaser on a regular basis regarding developments and progress toward settlement. Purchaser shall have full rights to participate in all external proceedings, meetings and conferences, including all meetings or communications with representatives of the U. S. Government related to this matter. It is the intent of both parties to work closely together for a prompt and mutually satisfactory resolution of all issues. Hughes is aware of Purchaser's significant interests in the resolution of this matter and assumes the responsibility to closely involve Purchaser in all aspects. Hughes shall continue to have sole responsibility and authority to settle or otherwise conclude such investigation on and after the Closing, provided that Hughes shall be required to obtain the consent of Purchaser to any such conclusion or settlement, such consent not to be unreasonably withheld or delayed, except that the consent of Purchaser shall not be required in connection with any settlement, whether or not such settlement fully resolves the matter, solely involving the payment of monetary penalties or fines. To the extent that such settlement does not fully resolve the matter, Hughes shall continue to be responsible as to the remaining portions of the China Investigation as provided herein until such time as there is a full and final resolution of all criminal, civil and administrative aspects of the China Investigation. Purchaser shall cause the Company and its Subsidiaries (including the employees of each) to cooperate with and assist Hughes in such settlement efforts and otherwise in resolving the China Investigation. Notwithstanding anything hereto to the contrary, no consent of Purchaser 61 shall be required for the settlement of any portion of this matter which is limited to a resolution of the personal liability of any officer, director or employee of Hughes or its Subsidiaries. Hughes shall retain sole liability for payment of and shall indemnify and hold harmless Purchaser from the full amount of any monetary fines and penalties resulting from the China Investigation, whether in connection with a settlement or not, except to the extent provided otherwise in section (d) below. (c) In the event that Purchaser shall consent to a settlement involving an agreement or (subject to Section 10.5(d)) shall otherwise become subject to a debarment, suspension or limitation as a result of the China Investigation which (in either case) would be deemed to constitute a Material Adverse Change to the Company as defined in Section (a) above, Hughes shall indemnify and hold harmless Purchaser from any and all Losses as the result of such Material Adverse Change. Hughes and Purchaser shall endeavor to determine whether damages are owed by Hughes to Purchaser in respect thereof, and if so, the amount thereof. If Hughes and Purchaser shall be unable to agree upon whether any such amount is payable by Hughes to Purchaser, or agree upon the amount thereof, such dispute shall be resolved pursuant to the dispute resolution provisions of Section 14.3 herein and specifically, such arbitration shall serve to fix the damages suffered by Purchaser as a result of such Material Adverse Change. Any arbitration findings shall be binding, and Hughes shall be liable to the Purchaser for the damages so established. (d) If, following the Closing, Hughes shall request Purchaser's consent to a settlement of the China Investigation which Hughes can reasonably demonstrate would be acceptable to the United States Government (or applicable Governmental Body), and Purchaser withholds or unreasonably delays its consent following such request, then at Hughes' election, Hughes shall be entitled to pay to Purchaser the amount which would have been payable by Hughes to the Government (and is not otherwise paid by Hughes to the Government), together with the amount which would have been payable by Hughes to Purchaser had such settlement been effected (either as agreed by Purchaser and Hughes or as determined pursuant to arbitration as contemplated in Section 10.5(c) above) in full satisfaction and discharge of Hughes' obligations to Purchaser in respect of the China Investigation. If, following the date on which Purchaser refuses to consent to such settlement, the United States Government (or other applicable Governmental Body) continues to pursue or otherwise implicate Hughes or its Subsidiaries in connection with the China Investigation, Purchaser shall indemnify and hold harmless Hughes and any such Subsidiary for any and all fines and penalties incurred in excess of the amount of fines and penalties which would have been incurred had Purchaser agreed to accept the settlement proposed by Hughes. 62 ARTICLE XI TAX MATTERS 11.1 Filing of Income Tax Returns; Payment of Income Taxes. ----------------------------------------------------- (a) Income Tax Returns for Pre-Closing Taxable Periods. (i) The Seller shall (A) include the Company and (where applicable) any of its Subsidiaries in, or cause the Company and (where applicable) any of its Subsidiaries to be included in, (1) the U.S. consolidated federal Income Tax Returns of the GM Consolidated Group required to be filed after the date hereof for all Pre-Closing Taxable Periods, including the taxable period ending on the Closing Date and (2) where applicable, all other Combined Returns for Pre-Closing Taxable Periods that are required to be filed by a member of the GM Group, including the taxable period ending on the Closing Date and (B) file or cause to be filed all other Income Tax Returns of or which include one or more members of the Company Group that are required to be filed (taking into account any extensions) on or prior to the Closing Date. The Seller shall pay or cause to be paid any and all Income Taxes due with respect to such Income Tax Returns. The Purchaser shall, and shall cause each member of the Company Group to, execute such documents and take such actions as shall be reasonably requested by GM or the Seller to cause those members of the Company Group designated by GM or the Seller to be included in any Combined Return (whether it relates to a Pre-Closing Taxable Period or a Straddle Period). Without limiting the foregoing, the Purchaser shall cause each member of the Company Group to file a Combined Return with GM or any member of the GM Group wherever required to do so by applicable law or wherever the option to do so is elected by any member of the GM Group. (ii) The Seller shall prepare, and the Purchaser shall file or cause to be filed (in the form and manner so prepared by the Seller), any Income Tax Return which (A) includes one or more members of the Company Group for a Pre-Closing Taxable Period, (B) is not required to be, and is not, filed on or prior to the Closing Date and (C) is required to be filed by a member of the Company Group. The Seller shall provide the Purchaser with each such Income Tax Return at least 30 days prior to the due date for filing thereof. (iii) The Seller shall prepare any documentation required to be filed in connection with the making of estimated Income Tax payments due in respect of Pre-Closing Taxable Periods for which the Seller (or another member of the GM Group) is obligated to prepare an Income Tax Return hereunder and shall make any such estimated Income Tax payments, whether due before, on or after the Closing Date. 63 (b) Income Tax Returns for Post-Closing Taxable Periods. The Purchaser shall be responsible for (i) preparing and filing or causing to be prepared and filed all Income Tax Returns required to be filed by the Company or any member of the Company Group for any Post-Closing Taxable Period and (ii) paying the Income Tax Liability due with respect to such Income Tax Returns. (c) Income Tax Returns for Straddle Periods. (i) For U.S. federal Income Tax purposes, the taxable year of the Company Group shall end as of the close of the Closing Date and, with respect to all other Income Taxes, the Seller and the Purchaser shall, unless prohibited by applicable law, take or cause to be taken all action necessary or appropriate to close the taxable period of the members of the Company Group as of the close of the Closing Date. None of the Seller, the Purchaser or any member of the Company Group shall take any position inconsistent with the preceding sentence on any Income Tax Return. (ii) The Purchaser shall prepare and file or cause to be filed, all Income Tax Returns of or which include the Company Group or any member thereof for a Straddle Period. The Purchaser shall provide the Seller with each such Income Tax Return at least 45 days prior to the due date for filing thereof. The Purchaser shall prepare or cause to be prepared such Income Tax Returns in a manner consistent with the past practice of the Company and its Subsidiaries to the extent that to do otherwise would result in a material adverse effect on the Income Tax Liability of the Company Group in a Pre-Closing Taxable Period (after giving effect to any inconsistency with past practice which has a beneficial effect on the Income Tax Liability of the Company Group in a Pre-Closing Taxable Period), except (A) to the extent that such Income Tax Return is consistent with the U.S. consolidated federal Income Tax Return of the GM Consolidated Group or (B) as required by applicable Law, or as a result of a Final Determination or (C) where the Seller has approved, or been deemed to have approved, an inconsistency with past practice having an adverse effect on the Company Group. The Seller shall have the right to review and approve (which approval shall not be unreasonably withheld) each such Income Tax Return within 15 Business Days following receipt thereof; provided, however, that -------- ------- the Seller shall be deemed to have unreasonably withheld its approval of such Income Tax Return unless, as the basis for withholding such approval, the Seller demonstrates (by means of a written explanation in sufficient detail to permit such conclusion to be verified) that the Purchaser has failed to comply with the requirements of the preceding sentence. The failure of the Seller to propose any changes to any such Income Tax Return within such 15-Business Day period shall be deemed to constitute the Seller's approval thereof. The Seller and the Purchaser shall attempt in good faith mutually to resolve any disagreements regarding such Income Tax Returns prior to the due date for filing thereof; provided, however, that -------- ------- the failure to resolve all disagreements prior to such date shall not relieve the Purchaser of its obligation to file (or cause to be filed) any such Income Tax Return in accordance with the first 64 sentence of this Section 11.1(c)(ii). Any disagreements regarding such Income Tax Returns which are not resolved prior to the filing thereof shall be resolved pursuant to Section 11.6 hereof. (iii) An Income Tax Liability in respect of an Income Tax Return for a Straddle Period shall be (A) allocated to the Seller to the extent such Income Tax Liability is attributable to a member of the Company Group for the period up to and including the Closing Date and (B) allocated to the Purchaser to the extent such Income Tax Liability is attributable to a member of the Company Group for the period subsequent to the Closing Date. The allocation of any Income Tax Liability between the portion of any Straddle Period ending on the Closing Date and the portion of such Straddle Period after the Closing Date shall be made by means of a closing of the books and records of the members of the Company Group as of the close of the Closing Date, as if such taxable period ended as of the close of the Closing Date; provided that exemptions, allowances or deductions that are calculated on an annual basis (including, depreciation and amortization deductions) shall be allocated between the period ending on the Closing Date and the period after the Closing Date in proportion to the number of days in each such period. In the case of any Income Tax Liability of any member of the Company Group which is attributable to the ownership by such member of an equity interest in a partnership or other "flowthrough" entity for Income Tax purposes, such allocation shall be made as if the taxable period of such partnership or other "flowthrough" entity ended as of the close of the Closing Date; provided, however, that to the extent that the -------- ------- information necessary to compute such allocation on the basis of an interim closing of the books of such "flowthrough" entity is not available to the Seller or the Purchaser, such allocation shall be made between the period ending on the Closing Date and the period after the Closing Date in proportion to the number of days in each such period. (iv) The Purchaser shall pay or cause to be paid the Income Tax Liability due with respect to any Straddle Period. No later than five Business Days prior to the due date for filing any such Income Tax Return (taking into account extensions), either (A) the Seller shall pay to the Company the excess, if any, of (1) the portion of the Income Tax Liability for such Straddle Period which is allocable to the Seller pursuant to Section 11.1(c)(iii) hereof over (2) the estimated Income Tax payments (including payments made in connection with an application for an extension) made in respect of such Straddle Period by a member of the GM Consolidated Group on or prior to the Closing Date, or (B) the Purchaser shall pay to the Seller the excess, if any, of (1) the amount described in clause (A)(2) of this sentence over (2) the amount described in clause (A)(1) of this sentence. (v) The Seller shall prepare any documentation required to be filed in connection with the making of estimated Income Tax payments due in respect of Straddle Periods for which the Purchaser (or any member of the Company Group) is obligated to file an Income Tax Return hereunder. The Purchaser shall make 65 any such estimated Income Tax payments which are due on or after the Closing Date. (d) Flowthrough Entities. If the Income Tax Liability of any member of the Company Group for a Post-Closing Taxable Period is increased or decreased as a result of the ownership by such member of an equity interest in a partnership or other "flowthrough" entity for Income Tax purposes and, in accordance with the principle set forth in the last sentence of Section 11.1(c)(iii) hereof, such increase or decrease is allocable to a Pre-Closing Taxable Period, (i) the Seller shall pay or cause to be paid to the Purchaser the amount of any such increase in Income Tax Liability, and (ii) the Purchaser shall pay or cause to be paid to the Seller the amount of any such decrease in Income Tax Liability. If the Purchaser files or causes to be filed, or any member of the Company Group is included in, an Income Tax Return setting forth an amount described in the preceding sentence, the Purchaser shall deliver to the Seller, no later than 45 Business Days prior to the due date for filing of such Income Tax Return, a schedule setting forth in reasonable detail the calculation of such amount. The Seller shall have the right to review and approve (which approval shall not be unreasonably withheld) such calculation for 30 Business Days. The failure of the Seller to propose any change to such calculation within such 30-Business Day period shall be deemed to constitute the Seller's approval thereof. The Seller shall pay to the Purchaser, or the Purchaser shall pay to the Seller (as the case may be), the amount required by this Section 11.1(d), no later than five Business Days prior to the due date for filing any such Income Tax Return (taking into account extensions). 11.2 Indemnification for Income Taxes. -------------------------------- (a) The Seller and Hughes shall jointly and severally be liable for, and the Purchaser and its Affiliates (including the Company and its Subsidiaries), shall be indemnified, and held harmless from and against any and all Income Taxes imposed upon the Company and its Subsidiaries (i) for any Pre- Closing Taxable Period, (ii) for any Straddle Period, but only with respect to Income Taxes allocated to the Seller in accordance with Section 11.1(c)(iii) hereof, and (iii) under Treasury Regulation (S)1.1502-6 (or any comparable provision under state, local or foreign law imposing several liability upon members of a consolidated, combined, affiliated, or unitary group) for the taxable periods ending on or before the Closing Date. (b) Without limiting the foregoing and notwithstanding anything to the contrary contained in this Agreement, the Seller and Hughes shall jointly and severally be liable for, and the Purchaser and its Affiliates (including the Company and its Subsidiaries) shall be indemnified, defended and held harmless from and against any and all federal, state and local Income Taxes resulting from, imposed on, sustained, or incurred by the Purchaser and its Affiliates (including the Company and its Subsidiaries) as a result of the Section 338(h)(10) Election. (c) From and after the Closing, the Purchaser shall be liable for, and shall indemnify the Seller and hold it harmless from and against any and all Income 66 Taxes imposed upon the Company or any of its Subsidiaries for (i) any Post- Closing Taxable Period of the Company or any of its Subsidiaries, and (ii) any Straddle Period, but only with respect to Income Taxes allocated to the Purchaser in accordance with Section 11.1(c)(iii) hereof. (d) Payment. Subject to the following two sentences, the indemnifying party shall pay to the indemnified party, no later than 45 Business Days after the indemnifying party receives from the indemnified party calculations thereof (in sufficient detail so as to permit the indemnifying party to understand such calculations), the amount that the indemnifying party is required to pay the indemnified party under this Section 11.2 by reason of a Final Determination. The failure of the indemnifying party to notify the indemnified party in writing of its disagreement with such calculations within 20 Business Days of receiving such calculations shall be deemed to constitute the indemnifying party's agreement therewith. Any dispute regarding such calculations shall be resolved in accordance with Section 11.6 hereof. 11.3 Refunds. The Seller shall be entitled to all Refunds (and any ------- interest thereon received from the applicable taxing authority) in respect of Income Taxes for all Pre-Closing Taxable Periods and the portion of any Straddle Period ending on the Closing Date. The Purchaser shall be entitled to all Refunds (and any interest thereon received from the applicable taxing authority) in respect of Income Taxes for all Post-Closing Taxable Periods and the portion of any Straddle Period beginning after the Closing Date. A party receiving a Refund to which another party is entitled pursuant to this Section 11.3 shall pay the amount to which such other party is entitled within 10 days after such Refund is Actually Realized. The Seller shall be permitted to file, and the Purchaser shall fully cooperate with the Seller in connection with, any claim for Refund in respect of an Income Tax for which the Seller is responsible pursuant to Section 11.1 hereof. In the event that a member of the Company Group is on notice that it will receive a Refund in respect of a Pre-Closing Period or the pre-Closing portion of a Straddle Period, the Purchaser shall, and shall cause the members of the Company Group to, take such other actions as shall be necessary or appropriate to cause the taxing authority to remit such Refund directly to the Seller. 11.4 Income Tax Contests. ------------------- (a) Notification. The Purchaser shall, promptly upon receipt of notice thereof by any member of the Company Group, notify the Seller in writing of any communication with respect to any pending or threatened Proceeding in connection with an Income Tax Liability (or an issue related thereto) for which the Seller may be responsible pursuant to this Article XI. The Purchaser shall include with such notification a true, correct and complete copy of any written communications, and an accurate and complete written summary of any oral communications, so received by a member of the Company Group. The failure of the Purchaser timely to forward such notification in accordance with the immediately preceding sentence shall not relieve the Seller of its obligation to pay such Income Tax Liability or indemnify the Company Group therefor, except and to the extent that the failure timely to forward such 67 notification actually prejudices the ability of the Seller to contest such Income Tax Liability or increases the amount of such Income Tax Liability. (b) Pre-Closing Taxable Periods. The Seller (or such member of the GM Group as the Seller shall designate) shall have the sole right to represent the interests of the members of the Company Group in any Proceeding relating to Pre-Closing Taxable Periods and to employ counsel of its choice at its expense. (c) Straddle Periods. The Seller and the Purchaser jointly shall represent the interests of the Company Group (or any member thereof) in any Proceeding relating to any Straddle Period. Neither party shall settle any dispute relating to an Income Tax Liability attributable to a member of the Company Group for a Straddle Period without the consent of the other party (which consent shall not be unreasonably withheld); provided, however, that if -------- ------- the Seller proposes to accept a settlement of such an Income Tax Liability, and the Purchaser does not consent thereto, the liability of the Seller under this Article XI in respect of such Income Tax Liability shall be limited to the portion of the proposed settlement amount attributable to the portion of the Straddle Period ending on the Closing Date. Any disputes regarding the conduct or resolution of any such Proceeding shall be resolved pursuant to Section 11.6; provided that no such resolution shall affect the limitation on the liability of - -------- the Seller set forth in the immediately preceding sentence. All costs, fees and expenses paid to third parties in the course of such Proceeding shall be borne by the Seller and the Purchaser in the same ratio as the ratio in which, pursuant to the terms of this Article XI, the Seller and the Purchaser would share the responsibility for payment of the Income Taxes asserted by the taxing authority in its claim or assessment if such claim or assessment were sustained in its entirety; provided, however, that in the event that any party hereto -------- ------- retains its own advisors or experts in connection with any such Proceeding, the costs and expenses thereof shall be borne solely by such party. (d) Post-Closing Taxable Periods. The Purchaser shall have the sole right to represent the interests of the Company Group (or any member thereof) in any Proceedings relating to a Post-Closing Taxable Period. 11.5 Cooperation and Exchange of Information. --------------------------------------- (a) Preparation of Income Tax Returns. (i) The Purchaser shall, and shall cause each member of the Company Group to, prepare and submit to the Seller, at the Purchaser's expense, all information that the Seller shall request, in such form as the Seller shall reasonably request, by the time specified by the Seller (which time shall be consistent with the timing of requests made by the Seller or other members of the GM Group to any member of the Company Group in prior taxable periods), (A) to enable the Seller (or the designated Subsidiary of the Seller) to prepare the Income Tax Returns described in Sections 11.1(a)(i), 11.1(a)(ii) and 11.1(c) hereof, and (B) to enable the Seller to determine the amounts of estimated tax due 68 and to prepare any related documentation in respect of the taxable periods covered by the Income Tax Returns described in clause (A) of this sentence. In the event that the Purchaser (x) does not timely provide such information or (y) provides information that is incomplete or otherwise not reasonably satisfactory to the Seller and does not cure such defect within 30 days after the Seller gives notice thereof, the Seller shall be entitled to require the Purchaser to engage, at the Purchaser's expense, a nationally recognized independent accounting firm reasonably acceptable to the Seller to gather and provide, in the manner set forth in the preceding sentence, the information which the Purchaser is required to provide under this Section 11.5(a). (ii) The Seller shall prepare and submit to the Purchaser, at the Seller's expense, all information that the Purchaser shall request to enable the Purchaser to prepare any Income Tax Returns which the Purchaser is responsible to prepare in accordance with Section 11.1(b) hereof. In the event that the Seller (A) does not timely provide such information or (B) provides information that is incomplete or otherwise not reasonably satisfactory to the Purchaser and does not cure such defect within 30 days after the Purchaser gives notice thereof, the Purchaser shall be entitled to require the Seller to engage, at the Seller's expense, a nationally recognized independent accounting firm reasonably acceptable to the Purchaser to gather and provide, in the manner set forth in the preceding sentence, the information which the Seller is required to provide under this Section 11.5(a). (b) Cooperation and Exchange of Information. Each party hereto, on behalf of itself and each of its Subsidiaries, agrees to provide each other party with such cooperation and information as such other party shall request in connection with the preparation or filing of any Income Tax Return or claim for Refund, the determination of the basis for such a claim for Refund, the determination and payment of estimated Income Taxes, or the conduct of any Proceeding. Such cooperation and information shall include, without limitation, upon reasonable notice (i) promptly forwarding copies of appropriate notices and forms or other communications (including information document requests, revenue agent's reports and similar reports, notices of proposed adjustments and notices of deficiency) received from or sent to any taxing authority or any other administrative, judicial or Governmental Body, (ii) providing copies of all relevant Income Tax Returns, together with accompanying schedules and related workpapers, documents relating to rulings or other determinations by taxing authorities, and such other records concerning the ownership and tax basis of property, or other relevant information which such party or its Subsidiaries may possess, (iii) the provision of such additional information and explanations of documents and information provided under this Article XI (including statements, certificates and schedules delivered by either party) as shall be requested by the other party, (iv) the execution of any document that may be necessary or helpful in connection with the filing of an Income Tax Return, a claim for a Refund, or in connection with any Proceeding, including such waivers, consents or powers of attorney as may be reasonably required by such party so as to exercise its rights under this Article XI, and (v) the use of the parties' efforts to obtain any 69 documentation from a Governmental Body or a third party that may be necessary or reasonably helpful in connection with any of the foregoing. It is expressly the intention of the parties to this Agreement to take all actions reasonably requested by the Seller that shall be necessary to establish the Seller as the sole agent for Income Tax purposes (to the extent that GM is not otherwise the sole agent for such purpose) of each member of the Company Group with respect to all Income Tax Returns of the Company Group for Pre-Closing Taxable Periods and for any Combined Return for a Straddle Period. Upon reasonable notice, the parties hereto shall make their, or shall cause their Subsidiaries to make their, employees and facilities available on a mutually convenient basis to provide explanation of any documents or information provided hereunder. Any information obtained under this Section 11.5 shall be kept confidential, except as otherwise reasonably may be necessary in connection with the filing of Income Tax Returns or claims for Refund or in conducting any Proceeding. (c) Record Retention. The Seller and the Purchaser agree to retain all Income Tax Returns, related schedules and workpapers, and all material records and other documents as required under Section 6001 of the Code and the regulations promulgated thereunder (and any similar provision of state or local Income Tax Law) existing on the date hereof or created in respect of (i) any taxable period that ends on or before or includes the Closing Date or (ii) any taxable period which may be subject to a claim hereunder, until the later of (A) the expiration of the statute of limitations (including extensions) for the taxable periods to which such Income Tax Returns and other documents relate and (B) the Final Determination of any payments which may be required in respect of such taxable periods under this Article XI. From and after the end of the period described in the preceding sentence of this Section 11.5(c), if a member of the GM Group or a member of the group which includes the Purchaser or any member of the Company Group wishes to dispose of any such records and documents, then the Seller or the Purchaser (as the case may be) shall provide written notice thereof to the other party and shall provide such other party (at such other party's sole expense) the opportunity to take possession of any such records and documents within 90 days after such notice is delivered; provided, however, that -------- ------- if such other party does not, within such 90-day period, confirm its intention to take possession of such records and documents, the Seller or the Purchaser (as the case may be) may destroy or otherwise dispose of such records and documents. (d) Remedies. (i) The Purchaser hereby acknowledges and agrees that (A) the failure of the Purchaser or any member of the Company Group to comply with the provisions of this Section 11.5 may result in substantial harm to the GM Group, including the inability to determine or appropriately substantiate an Income Tax Liability (or a position in respect thereof) for which the GM Group (or a member thereof) would be responsible, or a Refund to which the GM Group (or a member thereof) would be entitled, under this Article XI or appropriately defend against an adjustment thereto by a taxing authority, and (B) the remedies available to the GM Group for the breach by the Purchaser or a member of the Company Group 70 of its obligations hereunder shall include (without limitation) the indemnification by the Purchaser of the GM Group for any Income Tax Liability incurred or any Refund or Income Tax benefit lost or postponed by reason of such breach and the forfeiture by the Company Group of any related rights to indemnification by the Seller. In addition, if any member of the Company Group fails to provide (x) any cooperation or information requested pursuant to Section 11.5(a) by the dates specified therein or (y) any other information requested pursuant to this Article XI within a reasonable period, as determined in good faith by the party requesting such information, then, without limiting any other remedy available to any member of the GM Group for breach of the Purchaser's obligations under this Article XI, the Seller shall have the right to engage a nationally recognized accounting firm of its choice to gather such information. The Purchaser agrees to permit any such nationally recognized accounting firm full access to all appropriate records or other information in the possession of the Purchaser, any member of the Company Group or any of their respective Affiliates during normal business hours, and promptly to reimburse or pay directly all costs and expenses in connection with the engagement of such accountants. (ii) The Seller hereby acknowledges and agrees that (A) the failure of the Seller to comply with the provisions of this Section 11.5 may result in substantial harm to the Company Group, including the inability to determine or appropriately substantiate an Income Tax Liability (or a position in respect thereof) for which the Company Group (or a member thereof) would be responsible, or a Refund to which the Company Group (or a member thereof) would be entitled, under this Article XI or appropriately defend against an adjustment thereto by a taxing authority, and (B) the remedies available to the Company Group for the breach by the Seller of its obligations hereunder shall include (without limitation) the indemnification by the Seller of the Company Group for any Income Tax Liability incurred or any Refund or Income Tax benefit lost or postponed by reason of such breach and the forfeiture by the Seller of any related rights to indemnification by the Purchaser. In addition, if the Seller fails to provide any information requested pursuant to this Article XI within a reasonable period, as determined in good faith by the party requesting such information, then, without limiting any other remedy available to any member of the Company Group for breach of the Seller's obligations under this Article XI, the Purchaser shall have the right to engage a nationally recognized accounting firm of its choice to gather such information. The Seller agrees to permit any such nationally recognized accounting firm full access to all appropriate records or other information in its possession during normal business hours, and promptly to reimburse or pay directly all costs and expenses in connection with the engagement of such accountants. (e) Reliance. (i) If any member of the Company Group supplies information to a member of the GM Group in connection with an Income Tax Liability and an 71 officer of a member of the GM Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the GM Group identifying the information being so relied upon, the chief financial officer of such member of the Company Group shall certify in writing the accuracy and completeness of the information so supplied. The Purchaser agrees to indemnify and hold harmless each member of the GM Group and its directors, officers and employees from and against any fine, penalty, or other cost or expense of any kind (other than a liability for Income Tax) attributable to a member of the Company Group having supplied a member of the GM Group with inaccurate or incomplete information in connection with an Income Tax Liability. (ii) If the Seller supplies information to a member of the Company Group in connection with an Income Tax Liability and an officer of a member of the Company Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the Company Group identifying the information being so relied upon, the chief financial officer of the Seller (or such other member of the GM Group as the Seller designates) shall certify in writing the accuracy and completeness of the information so supplied. The Seller agrees to indemnify and hold harmless each member of the Company Group and its directors, officers and employees from and against any fine, penalty, or other cost or expense of any kind (other than a liability for Income Tax) attributable to the Seller having supplied a member of the Company Group with inaccurate or incomplete information in connection with an Income Tax Liability. 11.6 Resolution of Disputes. ---------------------- (a) Negotiation. The Seller and the Purchaser shall attempt in good faith promptly to resolve any dispute arising in connection with this Article XI. In the event of any such dispute, either party may deliver a Tax Dispute Notice to the other party, and within 20 Business Days of the receipt of such Tax Dispute Notice, the appropriate representatives of the Seller and the Purchaser shall meet to attempt to resolve the dispute. If the dispute has not been resolved within the Negotiation Period, or if one of the parties fails or refuses to negotiate the dispute, the issue shall be settled by arbitration pursuant to this Section 11.6, which shall be final and binding on the parties. Nothing in this Section 11.6 shall be construed to extend the time periods set forth in this Article XI during which any party may make a payment, deliver a notice, provide information, grant or withhold approval or consent or take any other action. "Negotiation Period" shall mean the period of 20 Business Days following the initial meeting of the representatives of Seller and Purchaser following the receipt of a Tax Dispute Notice. "Tax Dispute Notice" shall mean a written notice of a dispute between Seller and Purchaser with respect to the subject matter of this Article, which shall set forth in reasonable detail the nature of the dispute. 72 (b) Arbitration Procedure. Either party may initiate arbitration by giving the other party a written notice (the "Tax Arbitration Notice") either (i) within one year following the end of the Negotiation Period, or (ii) if the parties do not meet within 20 Business Days of the receipt of the Tax Dispute Notice, within one year thereafter. The arbitration shall be in accordance with the CPR Rules, except as otherwise provided in this Section 11.6. The arbitrators shall allow all discovery permitted by the Federal Rules of Civil Procedure. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. (S) 1-14. The place of arbitration shall be Los Angeles, California or such other location as shall be mutually agreed by the parties. Any deadlines specified in this Section 11.6 may be extended by mutual agreement of the parties. (c) Selection of Arbitrators. The Seller and the Purchaser shall make every reasonable effort to jointly select the arbitrator. If the Seller and the Purchaser are unable to agree on the designated arbitrator within 20 Business Days after either party gives the Tax Arbitration Notice, then the arbitration shall be by a panel of three arbitrators. The Seller and the Purchaser shall each appoint one arbitrator. The two arbitrators so appointed shall appoint the third arbitrator. If either the Seller or the Purchaser shall fail to appoint an arbitrator within such 20-Business Day period, the arbitration shall be by the sole arbitrator appointed by the other party. Whether jointly selected by the Seller and the Purchaser or otherwise, each arbitrator shall be an attorney who is generally recognized in the tax community as a qualified and competent tax practitioner with experience in the tax area involved in the issue or issues to be resolved. (d) Settlement Proposal. Each party shall present an overall settlement proposal to the arbitrator which shall encompass all issues to be resolved. The two proposals shall set the outer limits of the range within which the arbitrator can make a determination as to the appropriate settlement result. All costs of the arbitration process shall be borne by the party determined by the arbitrator to have lost the arbitration. In the event the arbitrator makes a determination which reflects a 50-50 settlement, the Seller and the Purchaser shall share equally the costs of the arbitration. In the event the arbitrator makes a determination which reflects a divided settlement, the arbitrator shall determine the proportion in which the parties shall share the costs of arbitration. (e) Time and Method of Making Payments Determined by Arbitration. All amounts determined by arbitration to be payable by one party to the other shall be due and payable on or before the 90th calendar day following the determination that such amount is payable. 11.7 Payments. -------- (a) Method of Payment. All payments required by this Article XI shall be made by (i) wire transfer to the appropriate bank account as may from time to time be designated by the parties for such purpose; provided that on the -------- date of such wire transfer notice of the transfer is given to the recipient thereof, or (ii) any other method agreed to 73 by the parties. All payments due under this Article XI shall be deemed to be paid when available funds are actually received by the payee. (b) Interest. Any payment required by this Article XI that is not made on or before the date required hereunder shall bear interest, from and after such date through the date of payment, at the Underpayment Rate. (c) Characterization of Payments. For all tax purposes, the parties hereto agree to treat, and to cause their respective Subsidiaries to treat, (i) except as required by applicable law, any payment required by Article X or this Article XI as an adjustment to the Purchase Price and (ii) any payment of interest or non-federal Income Taxes by or to a taxing authority as taxable or deductible, as the case may be, to the party entitled under this Article XI to retain such payment or required under this Article XI to make such payment, in either case except as otherwise mandated by applicable law; provided that in -------- the event it is determined as a result of a Final Determination that any such treatment is not permissible, the payment in question shall be adjusted to place the parties in the same after-tax position they would have enjoyed absent such Final Determination. 11.8 Existing Tax Allocation Agreements. The Tax Allocation ---------------------------------- Agreements shall be amended as of the Closing Date to exclude the members of the Company Group and to provide that any rights or obligations of the members of the Company Group existing thereunder shall be fully and finally settled without any payment by or to any member of the Company Group. 11.9 Section 338(h)(10) Election. --------------------------- (a) The Purchaser and the Seller shall, or shall cause their respective Affiliates to, make an election under Section 338(h)(10) of the Code and the Treasury Regulations promulgated thereunder and any corresponding or similar elections under state, local or foreign tax Law (collectively, the "Section 338(h)(10) Election") with respect to the purchase and sale of the Shares (other than the ICO Shares) hereunder. (b) The Purchaser and the Seller shall file, and shall cause their Affiliates to file, all Tax Returns and statements, forms and schedules in connection therewith in a manner consistent with the Section 338(h)(10) Election, the Modified Aggregate Deemed Sales Price (as defined below) and the Deemed Sales Price Allocation (as defined below) and shall take no position contrary thereto unless required to do so by applicable tax Laws. (c) As soon as practicable after the Closing Date, the Purchaser shall deliver to the Seller, the Purchaser's proposed allocation of the Purchase Price among the shares of the Company, Spectrolab and the ICO Shares and its calculation of (i) the Modified Aggregate Deemed Sales Price and (ii) the allocation thereof among the Assets of the Company and its Subsidiaries in accordance with the principles of Treasury Regulation (S) 1.338(h)(10)- 1(f)(1)(ii) (the "Deemed Sales Price Allocation"). The term 74 "Modified Aggregate Deemed Sales Price" shall mean an amount resulting from the Section 338(h)(10) Election determined pursuant to Treasury Regulation (S) 1.338(h)(10)-1(f) without regard to items described in Treasury Regulation (S) 1.338(h)(10)-1(f)(4) (provided that the Seller may take such items into account in filing Tax Returns). The Seller shall have the right to review and approve (which approval shall not be unreasonably withheld) such allocations and calculations for 60 days following receipt thereof. The Seller and the Purchaser shall attempt in good faith mutually to resolve any disagreements regarding such calculations. Any disagreements regarding such calculations which are not resolved 30 days prior to the due date for making the Section 338(h)(10) Election shall be promptly resolved pursuant to Section 11.6, which resolution shall be binding on the parties. (d) To the extent permitted by state or local tax Laws, the principles and procedures of this Section 11.9 shall also apply with respect to a Section 338(h)(10) Election or equivalent or comparable provision under state or local Law, including an election under Section 338(g) of the Code or equivalent or comparable provision under state or local Law. The Seller and the Purchaser shall make or cause to be made any election similar to a Section 338(h)(10) Election that is optional under any state or local Law so as to treat the sale of the Shares (other than the ICO Shares) contemplated herein as a sale of assets for state and local Income Tax purposes. 11.10 Transfer Taxes. The Seller and the Purchaser each shall be -------------- liable for and shall pay (and shall indemnify and hold harmless the other party against) 50% of all sales, use, stamp, documentary, filing, recording, transfer or similar fees or taxes or governmental charges (including real property transfer gains taxes, UCC-3 filing fees, FAA, ICC, DOT, real estate and motor vehicle registration, title recording or filing fees and other amounts payable in respect of transfer filings) as levied by any taxing authority or governmental agency in connection with the transactions contemplated by this Agreement (other than Income Taxes imposed on the Seller or its Subsidiaries). The Purchaser hereby agrees to file all necessary documents (including, but not limited to, all Tax Returns) with respect to all such amounts in a timely manner. 11.11 Sole Remedy. The indemnification provided for in this Article ----------- XI shall be the sole remedy for any claim in respect of Income Taxes and the provisions of Sections 10.1 through 10.3 hereof shall not apply to such claims. ARTICLE XII SURVIVAL 12.1 Survival. The respective representations and warranties of the -------- Seller and the Purchaser contained in this Agreement (other than the representations and warranties contained in Sections 5.3, 5.7(a), 5.28 and 6.7) or on any related schedule hereto or in any certificate or document delivered pursuant hereto (including the Definitive Agreements) and the agreement contained in Section 7.7(b) will survive the 75 execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the Closing Date and will continue in full force and effect for eighteen months after the Closing Date, and then terminate and expire with respect to any theretofore unasserted claims arising out of or otherwise in respect of any falsity, breach or inaccuracy of such representations and warranties or breach of Section 7.7(b). The representations and warranties contained in Sections 5.3, 5.7(a), 5.28 and 6.7 will survive the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the Closing Date until expiration of all applicable statutes of limitation and then expire with respect to any theretofore unasserted claims arising out of or otherwise in respect of any falsity, breach or inaccuracy of such representations and warranties, but each of such representations and warranties will terminate if this Agreement terminates prior to the Closing Date. ARTICLE XIII LIMITATION OF LIABILITY DISCLAIMER 13.1 Liabilities. Under no circumstances will any party be liable ----------- to any other party for (a) punitive or exemplary damages arising from breach of this Agreement or any of the Definitive Agreements, or arising out of any other provisions of this Agreement or any Definitive Agreement, (b) damage to business reputation or (c) any damages that were not proximately caused by a breach of this Agreement or any of the Definitive Agreements (in each case, even if that party has been advised of the possibility of such damages) (collectively, "Disclaimed Damages"); provided that each party will remain liable to the other party to the extent any Disclaimed Damages are claimed by a third party and are subject to indemnification pursuant to Articles X and XI hereof or under any indemnification provisions of any of the Definitive Agreements contemplated hereby. ARTICLE XIV MISCELLANEOUS 14.1 Certain Definitions. ------------------- For purposes of this Agreement, the following terms shall have the meanings specified in this Section 14.1: "AAA Rules" shall have the meaning ascribed to such term in Section --------- 14.3. "Accounting Arbitrator" shall have the meaning ascribed to such term --------------------- in Section 3.2(e). 76 "Acquisition Transaction" shall have the meaning ascribed to such term ----------------------- in Section 7.8(a). "Actually Realized" or "Actually Realizes" shall mean, for purposes of ----------------- ----------------- determining the timing of the incurrence of any Income Tax Liability or the realization of a Refund (or any related Income Tax cost or benefit) by a Person in respect of any payment, transaction, occurrence or event, the time at which the amount of Income Taxes paid by such Person is increased above or reduced below the amount of Income Taxes that such Person would have been required to pay but for such payment, transaction, occurrence or event or the time at which such Person receives cash in respect thereof. "Additional Satellite Assets" shall mean the Assets of HED and those --------------------------- other Assets identified on Schedule 5.7(a), including the leases, deeds, export licenses and Company Intellectual Property (as defined in Exhibit A) identified thereon. "Additional Satellite Assets Transfer" shall have the meaning ascribed ------------------------------------ to such term in the recitals. "Additional Satellite Liabilities" shall mean all Liabilities relating -------------------------------- to or arising out of the Additional Satellite Assets, including those allocated corporate liabilities identified on Schedule 5.7(a). "AECs" shall have the meaning ascribed to such term in Section ---- 5.20(m). "Agreement" shall have the meaning ascribed to such term in the --------- recitals. "Affiliate" shall mean, with respect to any Person, any other Person --------- controlling, controlled by or under common control with such Person. "Assets" shall mean any and all Assets, properties and rights, whether ------ tangible or intangible, whether real, personal or mixed, whether fixed, contingent or otherwise, and wherever located, including the following: (i) real property interests (including Leases), land, plants, buildings and improvements and all rights, privileges and easements which are appurtenant to such real estate; (ii) machinery, equipment, vehicles, furniture and fixtures, leasehold improvements, supplies, repair parts, tools, plant, laboratory and office equipment and other tangible personal property, together with any rights or claims arising out of the breach of any express or implied warranty by the manufacturers or sellers of any of such assets or any component part thereof; (iii) inventories, including raw materials, work-in-process, finished goods, parts, accessories; 77 (iv) notes, loans and accounts receivable (whether current or not current), interests as beneficiary under letters of credit, advances and performance and surety bonds; (v) banker's acceptances, shares of stock, bonds, debentures, evidences of indebtedness, certificates of interest or participation in profit- sharing agreements, collateral-trust certificates, investment contracts, voting trust certificates, puts, calls, straddles, options, swaps, collars, caps and other securities or hedging arrangements of any kind; (vi) financial, accounting and operating data and records including books, records, electronic data, notes, sales and sales promotional data, advertising materials, credit information, cost and pricing information, customer and supplier lists, reference catalogs, payroll and personnel records, minute books, stock ledgers, stock transfer records and other similar property, rights and information; (vii) domestic and foreign patents and patent applications, together with any continuations, continuations-in-part or divisional applications thereof, and all patents issuing thereon (including reissues, renewals and re- examinations of the foregoing); invention disclosures; mask works; net lists; copyrights, and copyright applications and registrations; trademarks, service marks, service names, trade names, and trade dress, in each case together with any applications and registrations therefor and all appurtenant goodwill relating thereto; trade secrets, commercial and technical information, know-how, proprietary or confidential information, including engineering, production and other designs, notebooks, processes, drawings, specifications, formulae, and technology; computer and electronic data processing programs and software (object and source code), data bases and documentation thereof; inventions (whether patented or not); and all other Intellectual Property under the Laws of any country throughout the world; (viii) Contracts and all rights therein; (ix) prepaid expenses, deposits and retentions held by third parties; (x) claims, causes of action, choses in action, rights under insurance policies, rights under express or implied warranties, rights of recovery, rights of set-off, and rights of subrogation; (xi) Permits; and (xii) goodwill and going concern value. "Basket" shall have the meaning ascribed to such term in Section ------ 10.2(a). "Business Day" shall mean a day other than a Saturday, a Sunday or a ------------ day on which banking institutions located in the State of New York are authorized or obligated by Law or executive order to close. 78 "Capital Stock" of any Person shall mean any and all shares, interests ------------- (including partnership interests), warrants, rights, options or other interests, participations or other equivalents of or interests in (however designated) equity of such Person, including common or preferred stock, but excluding any debt securities convertible into or exchangeable for such equity. "Challenger Litigation" shall mean that certain litigation matter --------------------- entitled Hughes Communications Galaxy Inc. v. United States of America for ------------------------------------------------------------- breach of contract relating to the use of the space shuttle for commercial launches. "China Investigation" shall have the meaning ascribed to such term in ------------------- Section 10.5(a). "Claim" shall have the meaning ascribed to such term in Section ----- 10.3(a). "Closing" shall have the meaning ascribed to such term in Section 4.1. ------- "Closing Analysis" shall have the meaning ascribed to such term in ---------------- Section 7.18. "Closing Date" shall have the meaning ascribed to such term in Section ------------ 4.1. "Closing Net Assets" shall mean the net difference between the sum of ------------------ the assets and the sum of the liabilities included in the Closing Statement of Net Assets. "Closing Statement of Assets and Liabilities" shall have the meaning ------------------------------------------- ascribed to such term in Section 3.2(a). "Closing Statement of Net Assets" shall have the meaning ascribed to ------------------------------- such term in Section 3.2(b). "Code" shall mean the Internal Revenue Code of 1986, as amended. ---- "Combined Return" shall mean a consolidated, combined or unitary --------------- Income Tax Return that includes, or is permitted to include, one or more members of the GM Group and one or more members of the Company Group. "Company" shall have the meaning ascribed to such term in the ------- recitals. "Company Group" shall mean the Company and its Subsidiaries. ------------- "Common Stock" shall have the meaning ascribed to such term in Section ------------ 5.3. "Company Property" shall have the meaning ascribed to such term in ---------------- Section 5.12(b). 79 "Company Shares" shall have the meaning ascribed to such term in the -------------- recitals. "Competitive Commercial Satellite System" shall have the meaning --------------------------------------- ascribed to such term in Section 7.11(a). "Computer Systems" shall have the meaning ascribed to such term in ---------------- Section 5.27. "Confidential Information" shall mean with respect to any party ------------------------ hereto, (a) any Information concerning such party, its business or any of its Affiliates that was obtained by another party hereto prior to the Closing Date, and (b) any other Information obtained by, or furnished to, another party hereto that (i) is marked "Proprietary" or "Company Private" or words of similar import by the party owning such Information, or any Affiliate of such party, or (ii) the party owning such Information has notified such other party in writing is confidential or secret; provided, however, that any Information provided by -------- ------- Hughes to the Company regarding the Satellite Business shall not be deemed Confidential Information with respect to the use of such Information in its businesses by the Company. "Confidentiality Agreement" shall mean that certain Confidentiality ------------------------- Agreement, dated as of November 15, 1999, by and between Hughes and the Purchaser. "Consent" shall mean consents, waivers, approvals, allowances, ------- declarations, novations, authorizations, permits, filings, orders, registrations and notifications. "Contaminant" shall have the meaning ascribed to such term in Section ----------- 5.14(j). "Contract" shall mean any contract, agreement, Lease, license, sales -------- order, purchase order, indenture, note, bond, loan, instrument, lease, commitment or other arrangement or agreement that is binding on any Person or any part of its property under applicable Law. "Copyrights" shall have the meaning ascribed to such term in Section ---------- 5.14(a). "COTS" shall have the meaning ascribed to such term in Section ---- 5.14(f). "CPR Rules" shall mean the current version of the Rules for Non- --------- Administered Arbitration of Business Disputes promulgated by the Center for Public Resources. "Deemed Sales Price Allocation" shall have the meaning ascribed to ----------------------------- such term in Section 11.9(c) hereof. 80 "Defense" shall mean HE Holdings, Inc. ------- "Definitive Agreements" shall have the meaning ascribed to such term --------------------- in Section 1.5 hereof. "Demand" shall have the meaning ascribed to such term in Section 14.3. ------ "Disabling Code" shall have the meaning ascribed to such term in -------------- Section 5.14(j). "Disclaimed Damages" shall have the meaning ascribed to such term in ------------------ Section 13.1. "Dispute Notice" shall have the meaning ascribed to such term in -------------- Section 14.3. "Disputes" shall have the meaning ascribed to such term in Section -------- 14.3. "EMA" shall have the meaning ascribed to such term in Section 5.20(m). --- "Employee Benefit Plans" shall have the meaning ascribed to such term ---------------------- in Section 5.16(a). "Environmental Law" shall mean any applicable foreign, federal, state ----------------- or local Law or rule of common law as in effect as of the Closing Date relating to the protection of the environment, noise, odor, pollution, health and safety and contamination from Hazardous Substances, including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. (S) 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App. (S) 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.), the Clean Water Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C. (S) 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. (S) 136 et seq.), and the regulations promulgated pursuant thereto. "Environmental Managers" shall mean those persons at the Company ---------------------- having direct oversight and responsibility for environmental, health and safety matters for the Company and its Subsidiaries. "ERISA" shall have the meaning ascribed to such term in Section ----- 5.16(a). "Escrow Agreement" shall have the meaning ascribed to such term in ---------------- Section 3.1(b). "Estimated Closing Net Assets" shall have the meaning ascribed to such ---------------------------- term in Section 3.1(a). 81 "Excluded Assets" shall mean all of the outstanding capital stock of --------------- Hughes Global Services, Inc., all of the Company's or its Subsidiaries' rights in the capital stock of PT Pasifik Satelit Nusantara and Hughes do Brasil- Electronicae Communicacoes S.A., the equity interests in the venture capital funds known as Medical Science Partners and Technology for Information and Entertainment and all of the Company's or its Subsidiaries' claims, rights and obligations relating to the Challenger Litigation. "Excluded Assets Transfer" shall have the meaning ascribed to such ------------------------ term in the recitals. "Final Determination" shall mean the final resolution of Liability for ------------------- any Tax, which resolution may be for a specific issue or adjustment or for a taxable period, (i) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the Laws of a state or local taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund or the right of the taxing authority to assert a further deficiency in respect of such issue or adjustment or for such taxable period (as the case may be); (ii) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (iii) by a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the Laws of a state or local taxing jurisdiction; (iv) by any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the jurisdiction imposing such Income Tax; or (v) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the parties. "Financial Statements" shall have the meaning ascribed to such term in -------------------- Section 5.8. "FIRPTA Affidavit" shall have the meaning ascribed to such term in ---------------- Section 8.2(f). "GAAP" shall mean generally accepted United States accounting ---- principles as of the date hereof. "GM" shall mean General Motors Corporation, a Delaware corporation. -- "GM Consolidated Group" shall mean GM and the other members of the --------------------- affiliated group of corporations (within the meaning of Section 1504(a) of the Code) of which GM is the common parent. 82 "GM Group" shall mean, solely for purposes of this Agreement, GM and -------- each of the other members of the GM Consolidated Group, other than any member of the Company Group. "Governmental Body" shall mean any government or governmental or ----------------- regulatory body thereof, or political subdivision thereof, whether federal, state, local or foreign, or any agency, instrumentality or authority thereof, or any court or arbitrator (public or private). "Hazardous Substance" shall mean any substance, material or waste ------------------- which is regulated as hazardous, toxic, a contaminant, a pollutant or words of similar meaning by any Governmental Body with jurisdiction over environmental matters and the operations of the Company including petroleum and its by- products. "HED" shall mean Hughes Electronics Dynamics, a division of the --- Seller. "HNS" shall have the meaning ascribed to such term in Section 7.19. --- "HSR Act" shall have the meaning ascribed to such term in Section ------- 5.6(b). "Hughes" shall have the meaning ascribed to such term in the recitals. ------ "ICO" shall mean ICO Global Communications (Operations) Ltd., a Cayman --- company, together with its successors and assigns. "ICO Closing Downward Adjustment" shall have the meaning ascribed ------------------------------- thereto in Section 3.1(b)(ii) hereof. "ICO Closing Upward Adjustment" shall have the meaning ascribed ----------------------------- thereto in Section 3.1(b)(ii) hereof. "ICO Contract" shall mean (collectively) each contract between ICO or ------------ its Affiliates and the Company or its Affiliates. "ICO Contract Closing Net Asset Value" shall mean the amount reflected ------------------------------------ as an asset in respect of all ICO Contracts, less any liabilities or reserves recorded in respect of the ICO Contracts, in the computation of Closing Net Assets, provided that for this purpose there shall not be included in such assets any claims of the Company against ICO for which payment has been assured to the reasonable satisfaction of Purchaser "ICO Contract Estimated Net Asset Value" shall mean the amount -------------------------------------- reflected as an asset in respect of all ICO Contracts, less any liabilities or reserves recorded in respect of all ICO Contracts, in the computation of Estimated Closing Net Assets, provided that for this purpose there shall not be included in such assets any claims of the Company against ICO for which payment has been assured to the reasonable satisfaction of Purchaser. 83 "ICO Contract Material Modification" shall mean a modification to any ---------------------------------- ICO Contract or the entry into a new ICO Contract, in either case which under GAAP requires a material reduction in the net carrying value of the assets (i.e., less any liabilities or reserves) relating to ICO on the financial statements of the Company. "ICO Escrow Amount" shall have the meaning ascribed thereto in Section ----------------- 3.1(b)(ii). "ICO Holdings" shall mean ICO Global Communications (Holdings) Ltd., a ------------ Bermuda corporation, together with its successors and assigns. "ICO Post-Closing Resolution" shall mean: (i) substantial --------------------------- consummation of a plan of reorganization (or similar restructuring of the assets and liabilities of ICO) in connection with which (a) all ICO Contracts are either assumed or replaced with one or more new ICO Contracts; or (b) Purchaser or its Affiliate enters into a material new contract with ICO , or (ii) all ICO Contracts are either assumed or replaced with one or more new ICO Contracts or Purchaser or its Affiliate enters into a material new contract with ICO (other than a new contract: (x) for the maintenance or preservation of the ICO assets, or (y) for the furnishing of technical information to ICO, in furtherance of a possible ICO plan of reorganization), and receipt of bankruptcy court (or the equivalent) approval of: (a) such assumption or replacement or new contract and (b) funding commitments from investors in or lenders to ICO sufficient in amount to provide for full payment under such contract. "ICO Pre-Closing Resolution" shall mean: (i) substantial consummation -------------------------- of a plan of reorganization (or similar restructuring of the assets and liabilities of ICO) in connection with which all ICO Contracts are either assumed or replaced with one or more new ICO Contracts; or (ii) all ICO Contracts are either assumed or replaced with one or more new ICO Contracts, and receipt of bankruptcy court (or the equivalent) approval of: (a) such assumption or replacement and (b) funding commitments from investors in or lenders to ICO, sufficient in amount to provide for full payment under such contracts. "ICO Shares" shall have the meaning ascribed to such term in the ---------- recitals. "Income Tax" (i) shall mean (A) any United States federal, state, ---------- local or foreign tax, charge, fee, impost, levy or other assessment which is based upon, measured by, or calculated with respect to (1) net income or profits (including, but not limited to, the Michigan Single Business Tax and any capital gains, gross receipts, value added or minimum tax and any tax on items of tax preference, but not including sales, use, real property gains, real or personal property, transfer or similar taxes), or (2) multiple bases (including, but not limited to, corporate franchise, doing business or occupation taxes), if one or more of the bases upon which such tax may be based, by which it may be measured, or with respect to which it may be calculated is described in clause (i)(A)(1) of this definition, together with (B) any interest and any penalties, fines, additions to tax or additional amounts imposed by any taxing authority with respect thereto and (ii) shall 84 include any transferee liability in respect of an amount described in clause (i) of this definition. "Income Tax Liabilities" shall mean all liabilities for Income Taxes. ---------------------- "Income Tax Return" shall mean any Tax Return. ----------------- "Information" shall mean all records, books, contracts, instruments, ----------- computer data and other data and information. "Intellectual Property Rights" shall have the meaning ascribed to such ---------------------------- term in Section 5.14(a). "Intended Transferee" shall have the meaning ascribed to such term in ------------------- Section 1.4. "Intended Transferor" shall have the meaning ascribed to such term in ------------------- Section 1.4 "Invention Disclosures" shall have the meaning ascribed to such term --------------------- in Section 5.14(e). "Interim Date" shall have the meaning ascribed to such term in Section ------------ 5.8. "Interim Statement of Assets and Liabilities" shall have the meaning ------------------------------------------- ascribed to such term in Section 5.8 hereof. "Knowledge of the Seller" or "Seller's Knowledge" shall mean, with ----------------------- ------------------ respect to each applicable representation and warranty made by Hughes and the Seller in this Agreement, the actual knowledge of the Chief Executive Officer, Chief Financial Officer or General Counsel of the Company or the officers of Hughes or the Seller who are directly responsible for overseeing the function of the Satellite Business that is the subject of such representation or warranty. In addition, such term shall include the actual knowledge of the Seller's Director of Real Estate with respect to Section 5.12 and the Environmental Managers with respect to Section 5.20. "Law" shall mean any federal, state, local or foreign law (including --- common law), statute, code, ordinance, rule, regulation, Order or other requirement. "Leases" shall have the meaning ascribed to such term in Section ------ 5.12(b). "Leased Property" shall have the meaning ascribed to such term in --------------- Section 5.12(b). 85 "Legal Proceeding" shall mean any judicial, administrative or arbitral ---------------- actions, suits, proceedings (public or private), claims, investigations or governmental proceedings. "Liability" shall mean any and all debts, liabilities, commitments and --------- obligations, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or not accrued, known or unknown, whenever or however arising (including whether arising out of any Contract or tort based on negligence or strict liability) and whether or not the same would be required by generally accepted accounting principles to be reflected in financial statements or disclosed in the notes thereto. "Licensed Software" shall have the meaning ascribed to such term in ----------------- Section 5.14(f). "Licensed Technology Agreements" shall have the meaning ascribed to ------------------------------ such term in Section 5.14(g). "Lien" shall mean any lien, pledge, mortgage, deed of trust, security ---- interest, claim, lease, charge, option, right of first refusal, easement, servitude, transfer restriction under any shareholder or similar agreement, encumbrance or any other restriction or limitation whatsoever. "Losses" shall mean all losses, Liabilities, claims, obligations, ------ demands, judgments, damages, dues, penalties, assessments, fines (civil or criminal), costs, liens, expenses, forfeitures, settlements or fees, reasonable attorneys' fees and court costs of any nature or kind, whether or not the same would be properly reflected on a statement of assets and liabilities or balance sheet. "Marks" shall have the meaning ascribed to such term in Section ----- 5.14(a). "Material Adverse Change" shall mean any material adverse change in ----------------------- the business, properties, results of operation or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole (and which shall be deemed not to include any adverse change generally affecting manufacturing companies engaged in the satellite industry). "Material Adverse Effect" shall mean any effect that has resulted in, ----------------------- or is reasonably likely to result in, a Material Adverse Change. "Material Contracts" shall have the meaning ascribed to such terms in ------------------ Section 5.15. "MOA" shall have the meaning ascribed to such term in Section 7.19. --- "Modified Aggregate Deemed Sales Price" shall have the meaning ------------------------------------- ascribed to such term in Section 11.9(c). 86 "MSA" shall have the meaning ascribed to such term in Section 5.20(m). --- "Negotiation Period" shall have the meaning ascribed to such term in ------------------ Section 11.6(a). "Novations" shall have the meaning ascribed to such term in Section --------- 7.6(a). "Order" shall mean any order, injunction, judgment, decree, ruling, ----- writ, assessment or arbitration award. "Overpayment Rate" shall mean the annual rate of interest described in ---------------- Section 6621(a)(1) of the Code (or similar provision of state or local Income Tax law, as applicable), as determined from time to time. "Owned Copyrights" shall have the meaning ascribed to such term in ---------------- Section 5.14(d). "Owned Marks" shall have the meaning ascribed to such term in Section ----------- 5.14(b). "Owned Patents" shall have the meaning ascribed to such term in ------------- Section 5.14(c). "Owned Properties" shall have the meaning ascribed to such term in ---------------- Section 5.12(a). "Owned Properties Documents" shall have the meaning ascribed to such -------------------------- term in Section 5.12(a). "Owned Software" shall have the meaning ascribed to such term in -------------- Section 5.14(f). "Owned Trade Secrets" shall have the meaning ascribed to such term in ------------------- Section 5.14(e). "Owning Party" shall have the meaning ascribed to such term in Section ------------ 7.1(c). "Panel" shall have the meaning ascribed to such term in Section 14.3. ----- "Party" shall have the meaning ascribed to such term in Section 14.3. ----- "Patents" shall have the meaning ascribed to such term in Section ------- 5.14(a). "Permits" shall mean any approvals, authorizations, consents, ------- franchises, licenses, permits or certificates. 87 "Permitted Exceptions" shall mean any of the following (except for a -------------------- mortgage or deed of trust): (i) all defects, exceptions, restrictions, easements, rights of way and encumbrances disclosed in policies of title insurance which have been made available to the Purchaser; (ii) statutory Liens for current taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings, (iii) mechanics', carriers', workers', repairers' and similar Liens arising or incurred in the ordinary course of business that are not material to the business, operations and financial condition of the property so encumbered or the Company; (iv) zoning, entitlement and other land use and environmental regulations by any Governmental Body, provided that such regulations have not been violated; and (v) such other imperfections in title, charges, easements, restrictions and encumbrances which do not materially detract from the value of or materially interfere with the present use of any Company Property subject thereto or affected thereby. "Person" shall mean any individual, corporation, partnership, firm, ------ limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity. "Personal Property Leases" shall have the meaning ascribed to such ------------------------ term in Section 5.13(a). "Post-Closing Taxable Period" shall mean a taxable period that, to the --------------------------- extent it relates to a member of the Company Group, begins after the Closing Date. "Pre-Closing Taxable Period" shall mean a taxable period that, to the -------------------------- extent it relates to a member of the Company Group, ends on or before the Closing Date. "Prior Relationship" shall mean the ownership relationships between ------------------ Hughes and its Subsidiaries (other than the Company and its Subsidiaries) and the Company and its Subsidiaries at any time prior to the Closing Date. "Proceeding" shall mean any audit or other examination, judicial or ---------- administrative proceeding relating to liability for or refunds or adjustments with respect to Income Taxes. "Purchase Price" shall have the meaning ascribed to such term in -------------- Section 3.1. "Purchaser" shall have the meaning ascribed to such term in the --------- recitals. "Purchaser Documents" shall have the meaning ascribed to such term in ------------------- Section 6.2. "Purchaser Indemnified Parties" shall have the meaning ascribed to ----------------------------- such term in Section 10.1(a). 88 "Qualified Plans" shall have the meaning ascribed to such term in --------------- Section 5.16(b). "Refund" shall mean any refund of Income Taxes, including any ------ reduction in Income Tax Liabilities by means of a credit, offset or otherwise. "Registered Copyrights" shall have the meaning ascribed to such term --------------------- in Section 5.14(d). "Representatives" shall have the meaning ascribed to such term in --------------- Section 7.8(a). "Satellite Business" shall have the meaning ascribed to such term in ------------------ the recitals. "Section 338(h)(10) Election" shall have the meaning ascribed to such --------------------------- term in Section 11.9(a). "Securities Act" shall have the meaning ascribed to such term in -------------- Section 6.5. "Seller" shall have the meaning ascribed to such term in the recitals. ------ "Seller Necessary Consents" shall have the meaning ascribed to such ------------------------- term in Section 8.2(g). "Seller Documents" shall have the meaning ascribed to such term in ---------------- Section 5.2. "Seller Indemnified Parties" shall have the meaning ascribed to such -------------------------- term in Section 10.1(b). "Shares" shall have the meaning ascribed to such term in the recitals. ------ "Software" shall have the meaning ascribed to such term in Section -------- 5.14(a). "Spectrolab" shall have the meaning ascribed to such term in the ---------- recitals. "Spectrolab Shares" shall have the meaning ascribed to such term in ----------------- the recitals. "Straddle Period" shall mean a taxable period that, to the extent it --------------- relates to a member of the Company Group, includes, but does not end on, the Closing Date. "Subsidiary" shall mean any Person of which a majority of the ---------- outstanding equity interests or voting securities are owned, directly or indirectly, by another Person. 89 For purposes of this Agreement, all references to the Company's Subsidiaries shall be deemed to include Spectrolab. "SWMUs" shall have the meaning ascribed to such term in Section ----- 5.20(m). "System" shall have the meaning ascribed to such term in Section ------ 5.14(j). "Target Amount" shall have the meaning ascribed to such term in ------------- Section 3.1(a). "Tax Allocation Agreements" shall mean (i) the Agreement for the ------------------------- Allocation of United States Federal Income Taxes, by and between GM, Defense, Hughes and Delco Electronics Corporation, dated as of December 29, 1985, as amended and (ii) the Agreement for the Allocation of United States Federal Income Taxes, by and between GM, Defense, Hughes and Delco Electronics Corporation, dated as of December 17, 1997, as amended. "Taxes" shall mean (i) all federal, state, local or foreign taxes, ----- charges, fees, imposts, levies or other assessments, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever, whether computed on a separate, consolidated, unitary, combined, or any other basis, and shall include any transferee or secondary liability in respect of any tax (whether imposed by law, contractual agreement, or otherwise) and (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any taxing authority in connection with any item described in clause (i). "Tax Arbitration Notice" shall have the meaning ascribed to such term ---------------------- in Section 11.6(b). "Tax Dispute Notice" shall have the meaning ascribed to such term in ------------------ Section 11.6(a). "Tax Return" shall mean all returns, declarations, reports, estimates, ---------- information returns and statements required to be filed in respect of any Taxes. "Title Documents" shall have the meaning ascribed to such term in --------------- Section 5.12(b). "Trade Secrets" shall have the meaning ascribed to such term in ------------- Section 5.14(a). "Transfer Documents" shall mean those certain documents of assignment ------------------ and assumption providing for the Transfers. 90 "Transferee" shall mean any Person that will receive a transfer of ---------- Assets pursuant to Article I. "Transferor" shall mean any Person that will make a transfer of Assets ---------- pursuant to Article I. "Transfers" shall have the meaning ascribed to such term in the --------- recitals. "Underpayment Rate" shall mean the annual rate of interest described ----------------- in Section 6621(c) of the Code for large corporate underpayments of Income Tax (or similar provision of state or local Income Tax law, as applicable), as determined from time to time. "United States Contract" means any Contract with the United States and ---------------------- includes (a) a foreign military sales contract, (b) a United States Subcontract, and (c) an Inter-organizational Transfer that is associated with any other United States Contract or United States Subcontract. United States Contract does not include a contract with any state, local, or foreign government or instrumentality. "United States Subcontract" means any Contract with any Person other ------------------------- than the United States that is entered into under a United States Contract, at any tier. 14.2 Interpretation. For the purposes of this Agreement, (i) words -------------- in the singular shall be held to include the plural and vice versa and words of ---- ----- one gender shall be held to include the other gender as the context requires, (ii) the terms "hereof," "herein," and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, (iii) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless otherwise specified, and (iv) the word "or" shall not be exclusive. 14.3 Dispute Resolution. Except with respect to the matters ------------------ described in Section 3.2 and Article XI, which shall be resolved in accordance with the terms thereof, and except as otherwise expressly set forth in the Definitive Agreements, resolution of any and all disputes arising from or in connection with this Agreement or the Definitive Agreements, whether based on contract, tort, or otherwise (collectively, "Disputes"), shall be exclusively governed by and settled in accordance with the provisions of this Section 14.3. The parties hereto shall use all commercially reasonable efforts to settle all Disputes without resorting to mediation, arbitration or otherwise. The party asserting a Dispute shall deliver to the other party a written notice setting forth the basis for the issue in detail, and identifying the section of this Agreement or Definitive Agreement in question (the "Dispute Notice"). Within ten days of receipt of a Dispute Notice, the issue shall be elevated to a designated panel of four individuals, two representatives from each party (one who shall be a business representative, and the other who shall be a technical or accounting representative, as appropriate). Such representatives shall be empowered and authorized to bind their respective companies 91 with respect to the matter in dispute, and to settle the issue on behalf of their respective companies. These representatives shall, within 30 days of receipt of the Dispute Notice, confer and in good faith make a reasonable effort to resolve the issue. If any Dispute remains unsettled, a party hereto may commence proceedings hereunder by delivering a written notice from a Senior Vice President or comparable executive officer of such party (the "Demand") to the other parties providing reasonable description of the Dispute to the others and expressly requesting arbitration hereunder. Such Dispute shall be submitted to arbitration under the terms hereof, which arbitration shall be final, conclusive and binding upon the parties, their successors and assigns. The arbitration shall be conducted in Los Angeles, California by three neutral arbitrators acting by majority vote (the "Panel") selected by agreement of the parties not later than ten (10) days after delivery of the Demand or, failing such agreement, appointed pursuant to the commercial arbitration rules of the American Arbitration Association, as amended from time to time (the "AAA Rules"). If an arbitrator so selected becomes unable to serve, his or her successors shall be similarly selected or appointed. The arbitration shall be conducted pursuant to the Federal Arbitration Act and such procedures as the parties subject to such arbitration (each, a "Party") may agree, or, in the absence of or failing such agreement, pursuant to the AAA Rules. Notwithstanding the foregoing: (a) each Party shall have the right to audit the books and records of the other Party that are reasonably related to the Dispute; (b) each Party shall provide to the other, reasonably in advance of any hearing, copies of all documents which a Party intends to present in such hearing; (c) each Party shall be allowed to conduct reasonable discovery through written document requests and depositions, the nature and extent of which discovery shall be determined by the Parties; provided that if the Parties cannot agree on the terms of such discovery, the nature and extent thereof shall be determined by the Panel which shall take into account the needs of the Parties and the purposes of arbitration to make discovery expeditious and cost effective and (d) each Party shall be entitled to make an oral presentation to the Panel. The award shall be in writing and shall specify the factual and legal basis for the award. The Panel shall apportion all costs and expenses of arbitration, including the Panel's fees and expenses and fees and expenses of experts, between the prevailing and non-prevailing Party as the Panel deems fair and reasonable. The parties hereto agree that monetary damages may be inadequate and that any party by whom this Agreement or Definitive Agreement is enforceable shall be entitled to seek specific performance of the arbitrators' decision from a court of competent jurisdiction. Notwithstanding the foregoing, in no event may the Panel award Disclaimed Damages as defined in Article XIII. Any arbitration award shall be binding and enforceable against the parties hereto and judgment may be entered thereon in any court of competent jurisdiction. 14.4 Expenses. Except as otherwise provided in this Agreement, the -------- Seller and the Purchaser shall each bear its own expenses incurred in connection with the negotiation and execution of this Agreement and each other agreement, document and instrument contemplated by this Agreement and the consummation of the transactions contemplated hereby and thereby, it being understood that in no event shall the Company bear any of such costs and expenses. 92 14.5 Further Assurances. The Seller and the Purchaser each agrees ------------------ to execute and deliver such other documents or agreements and to take such other action as may be reasonably necessary or desirable for the implementation of this Agreement and the consummation of the transactions contemplated hereby. 14.6 Submission to Jurisdiction; Consent to Service of Process. --------------------------------------------------------- (a) The parties hereto hereby irrevocably submit to the non- exclusive jurisdiction of any federal or state court located within the State of Delaware over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby and each party hereby irrevocably agrees that all claims in respect of such dispute or any Legal Proceeding related thereto may be heard and determined in such courts. The parties hereby irrevocably waive, to the fullest extent permitted by applicable Law, any objection that they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. (b) Each of the parties hereto hereby consents to process being served by any party to this Agreement in any Legal Proceeding by the mailing of a copy thereof in accordance with the provisions of Section 14.10. 14.7 Entire Agreement; Amendments and Waivers. This Agreement ---------------------------------------- (including the schedules and exhibits hereto) and the Definitive Agreements represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed by the party against whom enforcement of any such amendment, supplement, modification or waiver is sought. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. 14.8 Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Delaware. 14.9 Table of Contents and Headings. The table of contents and ------------------------------ section headings of this Agreement are for reference purposes only and are to be given no effect in the construction or interpretation of this Agreement. 93 14.10 Notices. All notices and other communications under this ------- Agreement shall be in writing and shall be deemed given when delivered personally or mailed by certified mail, return receipt requested, to the parties (and shall also be transmitted by facsimile to the Persons receiving copies thereof) at the following addresses (or to such other address as a party may have specified by notice given to the other party pursuant to this provision): If to the Seller or Hughes, to: Hughes Corporation 200 North Sepulveda Boulevard Los Angeles, California Facsimile No.: (310) 322-1841 Attention: Roxanne S. Austin, Chief Financial Officer With a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Facsimile No.: (212) 310-8007 Attention: Frederick S. Green, Esq. If to the Purchaser, to: The Boeing Company 7755 East Marginal Way South Seattle, Washington 98188 Facsimile No.: (206) 544-4900 Attention: James C. Johnson, Vice President, Secretary and Assistant General Counsel With a copy to: Gibson, Dunn & Crutcher, LLP 333 South Grand Avenue Los Angeles, California 90071 Facsimile No: (213) 229-7520 Attention: Andrew E. Bogen, Esq. 14.11 Severability. If any provision of this Agreement is invalid or ------------ unenforceable, the balance of this Agreement shall remain in effect. 14.12 Binding Effect; Assignment. This Agreement shall be binding -------------------------- upon and inure to the benefit of the parties and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party 94 beneficiary rights in any Person not a party to this Agreement. No assignment of this Agreement or of any rights or obligations hereunder may be made by either Hughes, the Seller or the Purchaser (by operation of Law or otherwise) without the prior written consent of the other parties hereto and any attempted assignment without the required consents shall be void. 95 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first written above. THE BOEING COMPANY By: /s/ James F. Albaugh --------------------------------------- Name: James F. Albaugh Title: Senior Vice President, The Boeing Company, President, Space and Communications Group HUGHES ELECTRONICS CORPORATION By: /s/ Roxanne S. Austin --------------------------------------- Name: Roxanne S. Austin Title: Sr. Vice President and CFO HUGHES TELECOMMUNICATIONS AND SPACE COMPANY By: /s/ Jennifer A. Smolker --------------------------------------- Name: Jennifer A. Smolker Title: Corporate Secretary 96 EX-4.2 3 INDENTURE BY & BETWEEN HUGHES AND BANK OF NEW YORK EXHIBIT 4.2 ________________________________________________________________________________ HUGHES ELECTRONICS CORPORATION INDENTURE Dated as of October 22, 1999 THE BANK OF NEW YORK Trustee ________________________________________________________________________________ CROSS-REFERENCE TABLE* Trust Indenture Act Section Indenture Section - ----------- ----------------- 310(a)(1) 7.10 (a)(2) 7.10 (a)(3) N.A. (a)(4) N.A. (a)(5) 7.10 (b) 7.10 (c) N.A. 311(a) 7.11 (b) 7.11 (c) N.A. 312(a) 2.05 (b) 10.03 (c) 10.03 313(a) 7.06 (b)(2) 7.07 (c) 7.06; 10.02 314(a) 4.03; 10.02 (c)(1) 10.04 (c)(2) 10.04 (c)(3) N.A. (e) 10.05 (f) NA 315(a) 7.01 (b) 7.05, 10.02 (c) 7.01 (d) 7.01 (e) 6.11 316(a)(last sentence) 2.09 (a)(1)(A) 6.05 (a)(1)(B) 6.04 (a)(2) N.A. (b) 6.07 (c) 2.12 317(a)(1) 6.08 (a)(2) 6.09 (b) 2.04 318(a) 10.01 (b) N.A. (c) 10.01 ______________ N.A. means "not applicable". *This Cross-Reference Table is not part of the Indenture. TABLE OF CONTENTS -----------------
Page ---- ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE........................... 1 Section 1.01. Definitions................................................. 1 Section 1.02. Other Definitions........................................... 8 Section 1.03. Incorporation by Reference of Trust Indenture Act........... 8 Section 1.04. Rules of Construction....................................... 9 ARTICLE 2. THE NOTES............................................................ 9 Section 2.01. Form and Dating............................................. 9 Section 2.02. Execution and Authentication................................ 10 Section 2.03. Registrar, Paying Agent and calculation agent............... 11 Section 2.04. Paying Agent to Hold Money in Trust......................... 11 Section 2.05. Holder Lists................................................ 12 Section 2.06. Transfer and Exchange....................................... 12 Section 2.07. Replacement Notes........................................... 22 Section 2.08. Outstanding Notes........................................... 22 Section 2.09. Treasury Notes.............................................. 23 Section 2.10. Temporary Notes............................................. 23 Section 2.11. Cancellation................................................ 23 Section 2.12. CUSIP Numbers............................................... 24 ARTICLE 3. REDEMPTION AND PREPAYMENT............................................ 24 Section 3.01. Notices to Trustee.......................................... 24 Section 3.02. Selection of Notes to Be Redeemed........................... 24 Section 3.03. Notice of Redemption........................................ 24 Section 3.04. Effect of Notice of Redemption.............................. 25 Section 3.05. Deposit of Redemption Price................................. 25 Section 3.06. Notes Redeemed in Part...................................... 26 Section 3.07. Optional Redemption......................................... 26 ARTICLE 4. COVENANTS............................................................ 26 Section 4.01. Payment of Notes............................................ 26 Section 4.02. Maintenance of Office or Agency............................. 27
i Section 4.03. Reports..................................................... 27 Section 4.04. Compliance Certificate...................................... 28 Section 4.05. Taxes....................................................... 29 Section 4.06. Liens....................................................... 29 Section 4.07. Corporate Existence......................................... 30 Section 4.08. Sale and Leaseback Transactions............................. 31 Section 4.09. Repurchase.................................................. 31 ARTICLE 5. SUCCESSORS........................................................... 32 Section 5.01. Merger, Consolidation, or Sale of Assets.................... 32 Section 5.02. Successor Corporation Substituted........................... 32 ARTICLE 6. DEFAULTS AND REMEDIES................................................ 33 Section 6.01. Events of Default........................................... 33 Section 6.02. Acceleration................................................ 34 Section 6.03. Other Remedies.............................................. 34 Section 6.04. Waiver of Past Defaults..................................... 35 Section 6.05. Control by Majority......................................... 35 Section 6.06. Limitation on Suits......................................... 35 Section 6.07. Rights of Holders of Notes to Receive Payment............... 36 Section 6.08. Collection Suit by Trustee.................................. 36 Section 6.09. Trustee May File Proofs of Claim............................ 36 Section 6.10. Priorities.................................................. 36 Section 6.11. Undertaking for Costs....................................... 37 ARTICLE 7. TRUSTEE.............................................................. 37 Section 7.01. Duties of Trustee........................................... 37 Section 7.02. Rights of Trustee........................................... 38 Section 7.03. Individual Rights of Trustee................................ 39 Section 7.04. Trustee's Disclaimer........................................ 40 Section 7.05. Notice of Defaults.......................................... 40 Section 7.06. Reports by Trustee to Holders of the Notes.................. 40 Section 7.07. Compensation and Indemnity.................................. 40 Section 7.08. Replacement of Trustee...................................... 41 Section 7.09. Successor Trustee by Merger, etc............................ 42
ii Section 7.10. Eligibility; Disqualification................................................................. 42 Section 7.11. Preferential Collection of Claims Against Company............................................. 43 Section 7.12. Calculation Agent............................................................................. 43 ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE............................................................... 43 Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...................................... 43 Section 8.02. Legal Defeasance and Discharge................................................................ 43 Section 8.03. Covenant Defeasance........................................................................... 44 Section 8.04. Conditions to Legal or Covenant Defeasance.................................................... 44 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. 46 Section 8.06. Repayment to Company.......................................................................... 46 Section 8.07. Reinstatement................................................................................. 46 ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER....................................................................... 47 Section 9.01. Without Consent of Holders of Notes........................................................... 47 Section 9.02. With Consent of Holders of Notes.............................................................. 47 Section 9.03. Compliance with Trust Indenture Act........................................................... 49 Section 9.04. Revocation and Effect of Consents............................................................. 49 Section 9.05. Notation on or Exchange of Notes.............................................................. 49 Section 9.06. Trustee to Sign Amendments, etc............................................................... 49 ARTICLE 10. MISCELLANEOUS......................................................................................... 49 Section 10.01. Trust Indenture Act Controls.................................................................. 49 Section 10.02. Notices....................................................................................... 50 Section 10.03. Communication by Holders of Notes with Other Holders of Notes................................. 51 Section 10.04. Certificate and Opinion as to Conditions Precedent............................................ 51 Section 10.05. Statements Required in Certificate or Opinion................................................. 51 Section 10.06. Rules by Trustee and Agents................................................................... 52 Section 10.07. No Personal Liability of Directors, Officers, Employees and Stockholders...................... 52 Section 10.08. Governing Law................................................................................. 52 Section 10.09. Successors.................................................................................... 52 Section 10.10. Severability.................................................................................. 52 Section 10.11. Counterpart Originals......................................................................... 52
iii Section 10.12. Table of Contents, Headings, etc.............................................................. 52
EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR iv INDENTURE dated as of October 22, 1999 between Hughes Electronics Corporation, a Delaware corporation (the "Company"), and The Bank of New York, a New York banking corporation, as trustee (the "Trustee"). The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Floating Rate Notes due October 23, 2000 (the "Initial Notes") and any Additional Notes: ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions. "144A Global Note" means a Global Note in substantially the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that shall be issued on the date of this Indenture in a denomination equal to the outstanding principal amount of the Initial Notes initially sold in reliance on Rule 144A. "Additional Notes" means any additional notes that the Company may issue pursuant to Section 2.01(d) of this Indenture. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. "Agent" means any Registrar, Paying Agent or co-registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary that apply to such transfer or exchange. "Applicable Spread" means, with respect to each Interest Period, a number of basis points above LIBOR, as calculated from time to time by the Calculation Agent, and as may be adjusted from time to time as set forth in the Note. "Attributable Debt" means, at the time of determination as to any lease, the present value (discounted at the actual rate, if stated, or, if no rate is stated, the implicit rate of interest of such lease transaction as determined by the chief executive officer, president, chief financial officer, any vice president, the treasurer or any assistant treasurer of the Company), calculated using the interval of scheduled rental payments under such lease (excluding any subsequent renewal or other extension options held by the lessee). The term "net rental payments" means, with respect to any lease for any period, the sum of the rental and other payments required to be paid in such period by the lessee thereunder, but not including, however, any amounts required to be paid by such lessee (whether or not designated as rental or additional rental) on account of maintenance and repairs, insurance, taxes, assessments, water rates, indemnities or similar charges required to be paid by such lessee thereunder or any amounts required to be paid by such lessee thereunder contingent upon the amount of sales, earnings or profits or of maintenance and repairs, insurance, taxes, assessments, water rates, indemnities or similar charges; provided, however, that, in the case of any lease which is terminable by the lessee upon the payment of a penalty in an amount which is less than the total discounted net rental payments required to be paid from the later of the first date upon which such lease may be so terminated and the date of the determination of net renal payments, "net rental payments" shall include the then-current amount of such penalty from the later of such two dates, and shall exclude the rental payments relating to the remaining period of the lease commencing with the later of such two dates. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Board of Directors" means (1) in respect of a limited liability company, the board of advisors of the Company; (2) in respect of a corporation, the board of directors of the corporation, or any authorized committee thereof; and (3) in respect of any other Person, the board or committee of that Person serving a similar function. "Business Day" means any day other than a Saturday, a Sunday or a legal holiday in the City of New York on which banking institutions are authorized or required by law, regulation or executive order to close; provided, that the day is also a London Business Day. "Calculation Agent" means the Person appointed by the Company to calculate the interest rate under the Initial Notes, and any and all successors thereto. "Cedel" means Cedelbank, societe anonyme. "Company" means Hughes Electronics Corporation, a Delaware corporation, and any and all successors thereto. "Consolidated Net Tangible Assets" means, at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption "total assets" (or any like caption) on a consolidated balance sheet of the Company and its consolidated Subsidiaries less (1) all current liabilities and (2) goodwill, trade names, patents, unamortized debt discount, organization expenses and other like intangibles of the Company and its consolidated Subsidiaries. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 10.02 hereof or such other address as to which the Trustee may give notice to the Company. 2 "Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Debt" means notes, bonds, debentures or other similar evidences of indebtedness for money borrowed. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, in substantially the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "DTV Sale Event" means either (i) a sale, transfer or disposition of a majority of the voting stock of DIRECTV, Inc. ("DTV") or of assets thereof representing at least fifty-one percent (51%) of the total fair market value (as determined by the Board of Directors of the Company, whose determination shall be conclusive) of the U.S. direct broadcast satellite business of DTV and its Affiliates engaged in such business to an entity not controlled directly or indirectly by the Company or (ii) any other transaction that has the result that the Company no longer controls directly or indirectly the business of DTV. "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear systems. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of this Indenture. "Global Note Legend" means the legend set forth in Section 2.06(f)(ii), which is required to be placed on all Global Notes issued under this Indenture. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes in the form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(g) hereof. 3 "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit. "Holder" means a Person in whose name a Note is registered. "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with Article 9 hereof. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Initial Notes" has the meaning assigned to it in the preamble of this Indenture. "Initial Purchaser" means Merrill Lynch & Co. "Institutional Accredited Investor" means an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Interest Determination Date" means the second London Business Day preceding an Interest Reset Date. "Interest Period" means the period commencing on and including October 22, 1999 or an interest payment date, as the case may be, and ending on and including the day immediately preceding the next succeeding interest payment date, or the maturity date, as the case may be. "Interest Reset Date" means each interest payment date on which LIBOR and the Applicable Spread are determined by the Calculation Agent, as described in the Notes. "LIBOR" means, with respect to each Interest Determination Date immediately preceding the applicable Interest Period, the rate (expressed as a percentage per annum) for deposits in United States dollars having a maturity of three months commencing on the first London Business Day of such Interest Period, that appears on Telerate Page 3750 as of 11:00 a.m., London time, on such Interest Determination Date; provided, however, that if Telerate Page 3750 does not include such a rate or is unavailable on such Interest Determination Date, the Calculation Agent shall request the principal London offices of each of four major reference banks in the London interbank market, as selected by the Calculation Agent following consultation with the Company, to provide the Calculation Agent with its offered quotation (expressed as a percentage per annum), for deposits in a Representative Amount for a three-month period, commencing on the first London Business Day of such Interest Period, to prime banks in the London interbank market as of approximately 11:00 a.m., London time, on such Interest Determination Date,. If at least two such offered quotations are so provided, LIBOR on such Interest Determination Date for such applicable Interest Period shall be the arithmetic mean of such quotations. If fewer that two quotations are so provided, the Calculation Agent shall request three major banks in New York City, as selected by the Calculation Agent following consultation with the Company, to provide such bank's rate (expressed as a percentage per 4 annum), as of approximately 11:00 a.m., New York City time, on such Interest Determination Date, for loans in a Representative Amount in United States dollars to leading European banks for a three-month period beginning on the first London Business Day of such Interest Determination Date; provided, however, that if such banks are not providing quotations in the manner described by this sentence, LIBOR determined as of such Interest Determination Date for such Interest Period shall be LIBOR in effect with respect to the immediately preceding Interest Period. "Lien" means any trust deed, mortgage, pledge, hypothecation, assignment, security interest, lien, charge or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the lien of an attachment, judgment or execution, or any conditional sale or other title retention agreement, any capitalized lease, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction, but excluding financing statements filed to give notice of leases in the ordinary course of business). "London Business Day" means any day on which dealings in United States dollars are transacted in the London interbank market. "Make Whole Spread" means 50 basis points. "Moody's" means Moody's Investors Service, Inc. and its successors. "New York Business Day" means any day other than a Saturday, Sunday or a legal holiday in the City of New York on which banking institutions are authorized or required by law or regulation or executive order to close. "Non-Recourse Debt" means all Debt which, in accordance with GAAP, is not required to be recognized on a consolidated balance sheet of the Company as a liability. "Non-U.S. Person" means a Person who is not a U.S. Person. "Notes" mean the Initial Notes and the Additional Notes, if any, treated together as a single class. "Offering" means the offering of the Initial Notes by the Company pursuant to the Offering Circular. "Offering Circular" means the offering circular of the Company, dated October 19, 1999, relating to the Initial Notes. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Assistant Secretary or any Vice-President of such Person. 5 "Officers' Certificate" means a certificate signed on behalf of the Company by at least two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer or the principal accounting officer of the Company, that meets the requirements of Sections 10.04 and 10.05 hereof. "Opinion of Counsel" means an opinion from legal counsel that meets the requirements of Sections 10.04 and 10.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Participant" means, with respect to the Depositary, Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel, respectively, and, with respect to the Depository Trust Company, shall include Euroclear and Cedel. "Permitted Receivables Financings" means, at any date of determination, the aggregate amount of any Non-Recourse Debt outstanding on such date relating to securitizations or other similar off-balance sheet financings of accounts receivable of the Company or any of its Subsidiaries. "Person" means any natural person, company, corporation, partnership, government, agency or instrumentality of a government, or any other entity. "Private Placement Legend" means the legend set forth in Section 2.06(f)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Rating Agency" means either of the Rating Agencies. "Rating Agencies" means (i) Moody's and S&P or (ii) if Moody's or S&P or both shall not make a rating of the Notes publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Company by notice to the Trustee, which shall be substituted for Moody's or S&P or both, as the case may be. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Global Note in substantially the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued on the date of this Indenture in a denomination equal to the outstanding principal amount of the Initial Notes initially sold in reliance on Rule 903 of Regulation S. "Representative Amount" means a principal amount that is representative for a single transaction in United States dollars in the market at that time. "Responsible Officer" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice 6 president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a 144A Global Note and a Regulation S Global Note, each of which shall bear the Private Placement Legend. "Restricted Period" means the 40-day restricted period as defined in Regulation S. "Restricted Subsidiary" means any Subsidiary (1) having assets exceeding 10% of the Consolidated Net Tangible Assets or (2) having operating revenues exceeding 10% of the operating revenues of the Company and its Subsidiaries on a consolidated basis, in each case, with respect to any determination period between the date of this Indenture and prior to the public release of the audited consolidated financial statements of the Company and its Subsidiaries for the fiscal year ending December 31, 1999, as shown on the pro forma financial statements dated as of June 30, 1999 and, thereafter, as shown on the audited consolidated financial statements of the Company and its Subsidiaries; provided, however, that "Restricted Subsidiary" shall not include any Subsidiary created solely to purchase receivables from the Company or any of its Subsidiaries, and which would not, in accordance with GAAP, be included in the consolidated financial statements of the Company. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated under the Securities Act. "S&P" means Standard and Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Subsidiary" means a corporation or any other entity of which at the time of determination the Company, one or more Subsidiaries of the Company, or the Company and one or more Subsidiaries, directly and/or indirectly, owns at least a majority of the outstanding stock or other beneficial interests having general voting power under ordinary circumstances to elect a majority of the board of directors, managers, trustees or individuals performing similar functions 7 of such corporation or other entity (irrespective of whether or not at the time stock or other beneficial interests of any other class or classes of such corporation or other entity shall have or might have voting power by reason of the happening of any contingency). "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa- 77bbbb) as in effect on the date on which this Indenture is qualified under the TIA, except as provided in Section 9.03. "Telerate Page 3750" means the display designated as "Page 3750" on Bridge Telerate, Inc. or any successor service, for the purpose of displaying the London interbank rates of major banks for United States dollars. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Global Note" means a permanent Global Note in substantially the form of Exhibit A attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "U.S. Person" means a U.S. person as defined in Rule 902(o) promulgated under the Securities Act. Section 1.02. Other Definitions. Defined in Term Section "Authentication Order".......................... 2.02 "Covenant Defeasance"........................... 8.03 "DTC"........................................... 2.03 "Event of Default".............................. 6.01 "Legal Defeasance".............................. 8.02 "Paying Agent".................................. 2.03 "Registrar"..................................... 2.03 "Successor Company"............................. 5.01 Section 1.03. Incorporation by Reference of Trust Indenture Act. (a) Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. 8 (b) The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and (c) All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04. Rules of Construction. (a) Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) "including" means "including without limitation"; (6) provisions apply to successive events and transactions; and (7) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time. ARTICLE 2. THE NOTES Section 2.01. Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date 9 of its authentication. The Notes shall be in denominations of $500,000 and integral multiples of $1,000 thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture. The Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Form of Notes. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) Euroclear and Cedel Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedelbank" and "Customer Handbook" of Cedelbank shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Cedelbank. (d) Subject to compliance with the provisions of Section 9.01, the Company may issue Additional Notes under this Indenture without limitation as to the aggregate principal amount thereof. Section 2.02. Execution and Authentication. (a) Two Officers shall sign the Notes for the Company by manual or facsimile signature. The Company's seal may be reproduced on the Notes and may be in facsimile form. (b) If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. (c) A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. (d) The Trustee shall, upon a written order of the Company signed by at least one Officer (an "Authentication Order"), authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. 10 (e) The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.03. Registrar, Paying Agent and Calculation Agent. (a) The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. (b) The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. (c) The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. (d) The Company initially appoints the Trustee to act as the Calculation Agent with respect to the Notes. The Company may change the Calculation Agent without notice to any Holders. Section 2.04. Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, or interest on the Notes, and shall notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. 11 Section 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date or such shorter time as the Trustee may allow, as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA (S) 312(a). Section 2.06. Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes shall be exchanged by the Company for Definitive Notes as provided in Section 2.06(c) hereof if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 90 days after the date of such notice from the Depositary, (ii) a Default has occurred and is continuing or (iii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee. Upon the occurrence of either of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), although beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (g) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend. Beneficial interests in 12 any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (B)(1) above. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: (A) if the transferee shall take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee shall take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: 13 (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (B) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (5) thereof; and, in each such case, if the Registrar or the Company so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the requesting party, if applicable to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to this subparagraph (iv). Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. Restricted Global Notes and beneficial interests therein shall be exchangeable for Definitive Notes if (A) the Depositary (x) notifies the Company that it is unwilling or unable to continue as depositary for the Restricted Global Notes and the Company thereupon fails to appoint a successor depositary or (y) has ceased to be a clearing agency registered under the Exchange Act and the Company fails to appoint a successor, (B) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Definitive Notes or (C) there shall have occurred and be continuing a Default with respect to the Notes. In all cases, Definitive Notes delivered in exchange for any Restricted Global Note or beneficial interests therein shall be registered in the names, and issued in any approved denominations, requested by or on behalf of the Depositary (in accordance with the Applicable Procedures). In such event, the Trustee shall cause the Restricted Global Notes to be canceled accordingly pursuant to Section 2.11 hereof, and the Company shall execute and upon receipt of an Authentication Order the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive 14 Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if the Registrar receives the following: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (B) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case, if the Registrar or the Company so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the requesting party, if applicable to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. Unrestricted Global Notes and beneficial interests therein shall be exchangeable for Definitive Notes if (A) the Depositary (x) notifies the Company that it is unwilling or unable to continue as depositary for the Unrestricted Global Notes and the Company thereupon fails to appoint a successor depositary or (y) has ceased to be a clearing agency registered under the Exchange Act and the Company fails to appoint a successor, (B) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Definitive Notes or (C) there shall have occurred and be continuing a Default with respect to the Notes. In all cases, Definitive Notes delivered in exchange for any Unrestricted Global Note or beneficial interests therein shall be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with the Applicable Procedures). In such event, the Trustee shall cause the Unrestricted Global Notes to be canceled accordingly pursuant to Section 2.11 hereof, and the Company shall execute 15 and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non- U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or 16 (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, and in the case of clause (C) above, the Regulation S Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if the Registrar receives the following: (A) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (B) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case, if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. 17 If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of another Restricted Definitive Note if the Registrar receives the following: (A) if the transfer shall be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transfer shall be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer shall be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if the Registrar receives the following: 18 (A) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (B) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (5) thereof; and, in each such case, if the Registrar or the Company so requests, an Opinion of Counsel in form reasonably acceptable to the requesting party, if applicable, to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form "THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY SECTION 144A THEREUNDER. THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF HUGHES ELECTRONICS CORPORATION THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE 19 SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (3) PURSUANT TO ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH OF CASES (1) THROUGH (4), IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(iii), (c)(iv), (d)(ii), (d)(iii) or (e) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, 20 AND ANY CERTIFICATE ISSUED IN REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC). ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. (g) Cancellation or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or cancelled in whole and not in part, each such Global Note shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (h) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request, in each case in accordance with the provisions of Section 2.02 hereof. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, 21 evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) Neither the Company nor the Trustee shall be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of mailing of a notice of redemption of Notes under Section 3.02 hereof and ending at the close of business on the day of such mailing, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. Section 2.07. Replacement Notes. (a) If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. An indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. (b) Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08. Outstanding Notes. (a) The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; provided, however, that Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07 hereof. 22 (b) If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. (c) If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. (d) If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. Section 2.09. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Section 2.10. Temporary Notes. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. Section 2.11. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee, upon direction by the Company, and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of such cancelled Notes in accordance with its customary practices (subject to the record retention requirements of the Exchange Act). The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. 23 Section 2.12. CUSIP Numbers. The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the "CUSIP" numbers. ARTICLE 3. REDEMPTION AND PREPAYMENT Section 3.01. Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 45 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. Section 3.02. Selection of Notes to Be Redeemed. If less than all of the Notes are to be redeemed in a redemption at any time, the Trustee shall select the Notes to be redeemed among the Holders of the Notes on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.03. Notice of Redemption. Subject to the provisions of Section 3.07 hereof, at least 15 days but not more than 45 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: 24 (a) the CUSIP number; (b) the redemption date; (c) the redemption price; (d) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (e) the name and address of the Paying Agent; (f) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (g) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (h) the paragraph of the Notes or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (i) that no representation is made as to the correctness or accuracy of the CUSIP number, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days, or such shorter period allowed by the Trustee, prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Section 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05. Deposit of Redemption Price. Prior to 10:00 a.m., New York City time, on the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. 25 If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. Section 3.07. Optional Redemption. (a) The Company may, at its option, redeem the Notes, in whole or in part, on any interest payment date upon not less than 15 nor more than 45 days' prior notice mailed to the Holders of the Notes to be redeemed. The redemption price shall be equal to the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed, determined as described in subparagraph (b) below, that would be due after the related redemption date but for such redemption, discounted to the redemption date on a quarterly basis (on the basis of a 360-day year and the actual number of days elapsed) at LIBOR, as described in subparagraph (b) below, plus the Make-Whole Spread. (b) For purposes of this calculation (i) the remaining scheduled payments of interest will be based upon LIBOR, as described below, plus the Applicable Spread which would have been in effect on the date of redemption and (ii) LIBOR will be LIBOR in effect on the second London Business Day preceding the redemption date, except that LIBOR will be representative of deposits in United States dollars equal to the number of months remaining to maturity as of the redemption date. ARTICLE 4. COVENANTS Section 4.01. Payment of Notes. (a) The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent (if other than the Company or a Subsidiary thereof), holds as of 10:00 a.m., Eastern Time, on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. 26 (b) The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02. Maintenance of Office or Agency. (a) The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. (b) The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. (c) The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. Section 4.03. Reports. (a) Whether or not the Company is required to do so by the rules and regulations of the Commission, so long as any Notes are outstanding, the Company shall furnish to the Trustee on behalf of the Holders of the Notes (i) all quarterly and annual financial and other information with respect to the Company and its consolidated Subsidiaries that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants, and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports, in each case, within 15 days following the time periods specified in the SEC's rules and regulations. 27 (b) For so long as any Notes remain outstanding, the Company shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144(d)(4) under the Securities Act. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). Section 4.04. Compliance Certificate. (a) The Company shall deliver to the Trustee, as promptly as practicable after each March 1, 2000 and September 1, 2000, and in any event prior to April 1, 2000 or October 1, 2000, respectively, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which such officers may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. 28 Section 4.05. Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. Section 4.06. Liens. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, issue, incur, guarantee or assume any Debt secured by a Lien upon any property or assets of the Company or any of its Restricted Subsidiaries or upon any shares of stock or indebtedness of any Restricted Subsidiary (whether such property, assets, shares of stock or indebtedness are now owned or hereafter acquired), without in any such case effectively providing concurrently with the issuance, incurrence, guarantee or assumption of any such Debt that the Notes (together, if the Company so elects, with any other indebtedness of the Company or the Restricted Subsidiary ranking equally with or senior to the Notes then existing or later created) will be secured equally and ratably with such Debt. The foregoing restriction does not, however, apply if the aggregate amount of Debt that the Company or any Restricted Subsidiary issues, incurs, guarantees or assumes and so secures by Liens, together with (1) all other Debt of the Company and its Restricted Subsidiaries which (if originally issued, incurred, guaranteed or assumed at such time) would otherwise be subject to the foregoing restrictions, but not including Debt permitted to be secured under clauses (a) through (g) of the immediately following paragraph and not including Permitted Receivables Financings, and (2) all Attributable Debt of the Company and its Restricted Subsidiaries in respect of sale and lease-back transactions, does not at the time exceed 15% of Consolidated Net Tangible Assets as shown on the consolidated financial statements for June 30, 1999. In addition, the covenant described in the first paragraph above does not apply to: (a) Liens existing on the date of the Indenture; (b) Liens on property, assets, shares of stock or indebtedness of any corporation or other entity existing at the time (1) that the corporation or other entity becomes a Restricted Subsidiary or (2) of a sale, lease or other disposition of all or substantially all of the properties of the corporation or other entity to the Company or a Restricted Subsidiary; (c) Liens on property that exist at the time the Company or a Restricted Subsidiary acquires the property; or Liens to secure (1) the payment of all or part of the purchase price of such property when the Company or a Restricted Subsidiary acquires it; (2) any Debt incurred prior to, at the time of, or within 180 days after, the later of the date of acquisition of such property and the date such property is placed in service for the purpose of financing all or any part of its purchase price, or (3) any Debt incurred for the purpose of financing the Company's or a Restricted Subsidiary's cost of improvements to such acquired property; provided, however, that for purposes of this clause (b), (x) a satellite will be treated as a newly-acquired asset as of the date it is placed in service and (y) any satellite transponder acquired 29 through the exercise of an early buy-out option will be treated as a newly- acquired asset as of the date such option is exercised; (d) Liens securing a Restricted Subsidiary's Debt to the Company or to another Subsidiary; (e) Liens on property of a corporation or other entity existing at the time such corporation or other entity is merged or consolidated with the Company or a Restricted Subsidiary (in accordance with Section 5.01) or at the time of a sale, lease or other disposition of the properties of a corporation or other entity as an entirety or substantially as an entirety to the Company or a Restricted Subsidiary; (f) Liens on property of the Company or a Restricted Subsidiary in favor of: (1) the United States or any State; (2) any department, agency or instrumentality or political subdivision of the United States or any State; (3) any other country, or any political subdivision of any other country, in connection with financing arrangements between the Company or a Restricted Subsidiary and any of the foregoing governmental bodies or agencies, to the extent that Liens are required by the governmental programs under which those financing arrangements are made, to secure partial, progress, advance or other payments under any contract or statute or to secure any indebtedness incurred for the purpose of financing all or part of the purchase price or the cost of construction of the property subject to such Liens; and (g) Any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any Lien referred to in the foregoing clauses (a) through (f), as long as (1) the principal amount of Debt secured by any such Lien does not exceed the principal amount of Debt so secured at the time of such extension, renewal or replacement and (2) the extension, renewal or replacement is limited to all or a part of the property (including the improvements) that secured the Lien being extended, renewed or replaced. Section 4.07. Corporate Existence. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Restricted Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Restricted Subsidiaries, if the Board of 30 Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole. Section 4.08. Sale and Leaseback Transactions The Company shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any arrangement with any Person in which the Company or a Restricted Subsidiary leases from such Person any property or assets that (1) the Company or the Restricted Subsidiary owns on the date that the Initial Notes are originally issued and (2) the Company or the Restricted Subsidiary has sold or will sell to such Person (except for (x) leases existing on the date of the Indenture, (y) temporary leases having a maximum term of three years and (z) leases between the Company and a Restricted Subsidiary or between Restricted Subsidiaries), unless either: (a) the Company or the Restricted Subsidiary could, under the Section 4.06 issue, incur, guarantee, assume, extend, renew or replace Debt secured by a Lien on the property or assets equal in amount to the Attributable Debt in respect of such sale and lease-back arrangement without equally and ratably securing the Notes; however, on and after the date that the sale and lease-back arrangement becomes effective, the Attributable Debt in respect of such sale and lease-back arrangement would be deemed for all purposes under Section 4.06 and this Section 4.08 to be Debt subject to the provisions of Section 4.06 hereof (which provisions include the exceptions set forth in clauses (a) through (g) of Section 4.06), or (b) within 180 days of the effective date of the sale and lease-back arrangement, the Company applies a cash amount equal to the Attributable Debt in respect of the arrangement to the retirement (other than any mandatory retirement or by way of payment at maturity) of Debt of the Company or any Restricted Subsidiary (other than Debt owed by the Company to any Restricted Subsidiary or Debt owed by any Restricted Subsidiary to the Company) that, or is extendible or renewable at the borrower's option, to a date more than twelve months after the date of the creation of such Debt. Section 4.09. Repurchase. Upon the occurrence of a DTV Sale Event, each Holder of the Notes will have the right to require that the Company repurchase all, but not less than all, of such Holder's Notes at a purchase price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase (such date, the "Repurchase Date") in accordance with the provisions of the next paragraph. Within 10 calendar days following any DTV Sale Event, the Company will mail a notice (a "DTV Sale Notice") to each Holder with a copy to the Trustee stating (i) that a DTV Sale Event has occurred and that such Holder has the right to require the Company to purchase all, but not less than all, of such Holder's Notes at a price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the Repurchase Date, (ii) that unless the Company defaults in making payment therefor, any Note accepted for repurchase pursuant to this offer will cease to accrue interest after the Repurchase Date, (iii) the circumstances and 31 relevant facts regarding such DTV Sale Event, (iv) the Repurchase Date (which shall be no earlier than 15 nor later than 20 New York Business Days from the date the DTV Sale Notice is mailed), (v) that a Holder electing to have a Note purchased pursuant to such offer must notify the Company of his intention to exercise such right no later than 12:00 noon New York City Time on the fifth New York Business day preceding the Repurchase Date by surrendering the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse side of the Note completed, to the Paying Agent at the address specified in the notice and (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the third New York Business Day prior to the Repurchase Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased. Hughes shall comply with all applicable federal and state securities laws in connection with each DTV Sale Notice sent in connection with a repurchase under the circumstances described above. On or before the Repurchase Date, the Company shall (i) accept for payment Notes tendered pursuant to the DTV Sale Event offer, (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes so tendered and (iii) deliver to the Paying Agent Notes so accepted together with an Officers' Certificate stating the Notes are being purchased by the Company. The Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price. If any Holder has withdrawn their election, their notes shall be promptly mailed by the Paying Agent to the Holder thereof. ARTICLE 5. SUCCESSORS Section 5.01. Merger, Consolidation, or Sale of Assets. The Company shall not consolidate or merge with or into another Person (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another Person unless (a) the Company is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (the "Successor Company") is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia, (b) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the Successor Company assumes all the obligations of the Company under the Notes and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee, and (c) immediately after such transaction, no Default or Event of Default exists. Section 5.02. Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in 32 accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE 6. DEFAULTS AND REMEDIES Section 6.01. Events of Default. An "Event of Default" occurs if: (a) the Company defaults in the payment when due of any installment of interest on the Notes, and such default continues for a period of 30 days; (b) the Company defaults in the payment, when due, of the principal of (and premium, if any, on) the Notes (whether at maturity, upon redemption, upon acceleration or otherwise); (c) the Company fails to perform or observe any other term, covenant or agreement contained herein for a period of 90 days after written notice as provided herein; (d) the default by the Company or by any Restricted Subsidiary on principal of, or interest on, any Debt which default has resulted in acceleration of any portion of such Debt and the aggregate amount of such Debt accelerated is equal to or in excess of $75 million; (e) the Company or any of its Restricted Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Restricted Subsidiary, pursuant to or within the meaning of Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is not paying its debts as they become due; and 33 (f) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Restricted Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Restricted Subsidiary in an involuntary case; or (ii) appoints a Custodian of the Company or any of its Restricted Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Restricted Subsidiary or for all or substantially all of the property of the Company or any of its Restricted Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Restricted Subsidiary; or (iii) orders the liquidation of the Company or any of its Restricted Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Restricted Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days. Section 6.02. Acceleration. If any Event of Default other than an Event of Default specified in Section 6.01(e) or (f), occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes within 10 days after notice to the Company may declare the principal amount of the Notes to be due and payable immediately, together with interest, if any, accrued thereon. If an Event of Default specified in Section 6.01(e) or (f) occurs, the principal of the Notes, together with interest, if any, shall ipso facto be due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of a majority in aggregate principal amount of the Notes then outstanding by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto. Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. 34 For purposes of this Section 6.03, the Trustee is hereby designated as attorney-in-fact for the Holders. Section 6.04. Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may, on behalf of the Holders of all of the Notes, waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on, the Notes (provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05. Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. Section 6.06. Limitation on Suits. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes (other than actions for payment of overdue principal of interest) only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. 35 Section 6.07. Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and interest on the Note, on or after the respective due dates expressed in the Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09. Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10. Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: 36 First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. Section 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7. TRUSTEE Section 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any opinions or 37 certificates specifically required to be furnished to the Trustee pursuant to the terms of this Indenture the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c), (e) and (f) of this Section and Section 7.02. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02. Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. 38 (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture; provided however, that the Trustee's conduct does not constitute willful misconduct or negligence. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (h) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture. (i) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder. Section 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. 39 Section 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. Section 7.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. Section 7.06. Reports by Trustee to Holders of the Notes. Within 60 days after each May 15 beginning with May 15, 2000, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA (S) 313(a) (but if no event described in TIA (S) 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA (S) 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA (S) 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA (S) 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange and of any delisting thereof. Section 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time such compensation as shall be agreed in writing for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify each of the Trustee and any predecessor Trustee against any and all losses, liabilities, damages, claims or expenses, including taxes (other than taxes based on the income of the Trustee), incurred by it arising out of or in connection with the 40 acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense or a portion thereof may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own willful misconduct, negligence or bad faith. The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(e) or (f) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the extent applicable. Section 7.08. Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or 41 (d) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed by the Company or by the Holders and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. Subject to the Lien provided for in Section 7.07 hereof, the retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided, however, that all sums owing to the Trustee hereunder shall have been paid. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. Section 7.09. Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trust created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have. Section 7.10. Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $10 million as set forth in its most recent published annual report of condition. 42 This Indenture shall always have a Trustee who satisfies the requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b). Section 7.11. Preferential Collection of Claims Against Company. The Trustee is subject to TIA (S) 311(a), excluding any creditor relationship listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to the extent indicated therein. Section 7.12. Calculation Agent. The Company appoints The Bank of New York to acts as Calculation Agent and The Bank of New York accepts its obligations set forth herein and in the Notes upon the terms and conditions hereof and thereof, and subject to the terms of the Calculation Agency Agreement dated the date hereof, between the Company and the Calculation Agent. The Company shall, so long as any of the Notes remain outstanding, maintain under appointment a Calculation Agent to calculate the rate of interest payable on the Notes in respect of each Interest Period. If the Calculation Agent is unable or unwilling to continue to act as such, or if the Calculation Agent fails to establish the applicable rate of interest for any Interest Period, or if the Company removes the Calculation Agent, the Company shall appoint the office of another bank to act as the Calculation Agent; provided, however, that the Calculation Agent shall not resign or be removed until acceptance of an appointment by a successor as evidenced by execution of an instrument accepting such appointment. ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight. Section 8.02. Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: 43 (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest, if any, on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. Section 8.03. Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.03 through 4.09, hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of Default. Section 8.04. Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes. In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination 44 thereof, in such amounts as shall be sufficient without any further reinvestment thereof, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest, if any, on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes shall not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes shall not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall occur under Sections 6.01(e) or 6.01(f) hereof at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel (which may be subject to customary exceptions) to the effect that on the 121st day following the deposit, the trust funds shall not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. 45 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance. Section 8.06. Repayment to Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its written request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease. Section 8.07. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Sections 8.01 or 8.02 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Sections 8.01 or 8.02 hereof until such time as the Trustee or Paying Agent is 46 permitted to apply all such money in accordance with Section 8.01 or 8.02 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes. Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (a) to secure any Notes; (b) to provide for the assumption of the Company's obligations to the Holders of the Notes by a successor to the Company pursuant to Article 5 hereof; (c) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; (d) to cure any ambiguity, defect or inconsistency; (e) to transfer, assign, mortgage or pledge any property to or with the Trustee; (f) to issue Additional Notes in any aggregate principal amount as contemplated by Section 2.01(e), all of which shall have the same terms, including interest and maturity date, as the Notes; and (g) to evidence the acceptance of appointment by a successor trustee. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02. With Consent of Holders of Notes. Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture and the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes including 47 Additional Notes, if any, then outstanding voting as a single class and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes, including Additional Notes, if any, voting as a single class. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes, including Additional Notes, if any, then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non- consenting Holder): (a) extend the final maturity of the Notes ; (b) reduce the principal amount of or interest on, any Note or alter or change the manner in which the interest on the Notes is determined; (c) change the currency in which the principal amount (including any amount in respect of original issue discount) or interest payable on any Notes is payable; (d) impair the right to institute suit for the enforcement of any payment on any Notes when due; or (e) reduce the above-stated percentage of outstanding Notes the consent of whose holders is necessary to modify or amend and to waive provisions of or defaults hereunder. 48 Section 9.03. Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect. Section 9.04. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. Section 9.05. Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06. Trustee to Sign Amendments, etc. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 10.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10. MISCELLANEOUS Section 10.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA (S) 318(c), the imposed duties shall control. 49 Section 10.02. Notices. Any notice or communication by the Company or the Trustee to the other is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next-day delivery, to the others' address: If to the Company: Hughes Electronics Corporation 200 North Sepulveda Boulevard El Segundo, California 90245 Attention: General Counsel Telecopy No.: (310) 662-9935 With a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Telecopier No.: (212) 310-8007 Attention: Michael E. Lubowitz, Esq. If to the Trustee: The Bank of New York 101 Barclay Street, Floor 21 West New York, New York 10286 Telecopier No.: (212) 815-5915 Attention: Corporate Trust Trustee Administration The Company or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first-class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA (S) 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. 50 If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. Section 10.03. Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA (S) 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA (S) 312(c). Section 10.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 10.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 10.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Section 10.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S) 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. 51 Section 10.06. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 10.07. No Personal Liability of Directors, Officers, Employees and Stockholders. No past, present or future director, officer, employee, incorporator or stockholder of the Company as such, shall have any liability for any obligations of the Company under the Notes, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. Section 10.08. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Section 10.09. Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. Section 10.10. Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 10.11. Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 10.12. Table of Contents, Headings, etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. 52 [Signatures on following page] 53 HUGHES ELECTRONICS CORPORATION By:_____________________________________ Name: Title: THE BANK OF NEW YORK, as Trustee By:_____________________________________ Name: Title: Dated as of October 22, 1999 EX-4.3 4 FORM OF FLOATING RATE NOTE EXHIBIT A (Face of Note) A. Floating Rate Notes due October 23, 2000 THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY SECTION 144A THEREUNDER. THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF HUGHES ELECTRONICS CORPORATION THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL A-1-1 BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (3) PURSUANT TO ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH OF CASES (1) THROUGH (4), IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. A-1-2 Floating Rates Notes due October 23, 2000 CUSIP _____________ No.__ $___________ HUGHES ELECTRONICS CORPORATION promises to pay to Cede & Co. or registered assigns, the principal sum of _________________ Dollars ($______________) on October 23, 2000. Interest Payment Dates: January 23, 2000, April 23, 2000, July 23, 2000 and October 23, 2000 Record Dates: January 8, 2000, April 8, 2000, July 8, 2000 and October 8, 2000 HUGHES ELECTRONICS CORPORATION By:___________________________ Name: Title: Dated: October __, 1999 This is one of the Global Notes referred to in the within-mentioned Indenture: THE BANK OF NEW YORK, as Trustee By:______________________________ Authorized Signatory ================================================================================ A-1-3 (Back of Note) Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. Hughes Electronics Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at the rate set forth in the following paragraph from October 22, 1999 until maturity. The Company shall pay interest quarterly in arrears on January 23, 2000, April 23, 2000, July 23, 2000 (each an "Interest Payment Date") and on the maturity date of each year, or if any such day is not a Business Day, on the next succeeding Business Day unless the Business Day is in the next succeeding calendar month, in which case the interest payment date will be the immediately preceding Business Day. Interest on the Notes will be computed on the basis of a 360 day year and the actual number of days elapsed. Interest on the Notes will accrue from, and including October 22, 1999, to, but excluding the first interest payment date and then from, and including, the immediately preceding interest payment date to which interest has been paid or duly provided for to, but excluding, the next interest payment date or the maturity date, as the case may be; provided, however, that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be January 23, 2000. Except in the case of the initial interest period, the per annum interest rate on the Notes will be calculated by the Calculation Agent. The per annum interest rate for the initial interest period is 7.45063%. The Calculation Agent will determine the interest rate on each Interest Reset Date. The interest rate in effect on each day that is not an Interest Reset Date will be LIBOR as determined as of the Interest Determination Date pertaining to the immediately preceding Interest Reset Date plus the Applicable Spread (as defined below). The interest rate in effect on any day that is an Interest Reset Date will be LIBOR as determined as of the Interest Determination Date pertaining to that Interest Reset Date plus the Applicable Spread. The Notes will bear interest a rate per annum equal to LIBOR plus the Applicable Spread, as adjusted by the Calculation Agent from time to time. Initially, the Applicable Spread will be 125 basis points. The initial spread and the spread as adjusted are referred to as the "Applicable Spread." The Applicable Spread will be determined by the Calculation Agent as of the Interest Determination Date related to each Interest Reset Date. The Applicable Spread is subject to adjustment on each Interest Reset Date, as set forth in the chart below, based on the rating of the Notes (referred to as the "rating") assigned by the Rating Agencies. The Applicable Spread will be determined by the Calculation Agent as of the Interest Determination Date related to each Interest Reset Date. The Applicable Spread will be based on the rating of the Notes assigned by the Rating Agencies as publicly announced as of the close of business on such Interest Determination Date in accordance with the chart below. For purposes of this provision, a public announcement shall occur when a Rating Agency publishes the revised rating in published or electronically displayed news sources, including a weekly credit publication or A-1-4 rating press release, generally used by such Rating Agency for the purpose of announcing its ratings. A-1-5
- ---------------------------------------------------------------------------------------------------- Rating Category Ratings Applicable Spread --------------- ------- ----------------- - ---------------------------------------------------------------------------------------------------- Moody's S&P ------- --- - ---------------------------------------------------------------------------------------------------- Investment Grade Baa3 or above BBB- or above plus 125 basis points - ---------------------------------------------------------------------------------------------------- Non Investment Grade/Split Rated Any time either one of, or both of, plus 175 basis points the ratings assigned by the Rating Agencies does not fall within the Investment Grade category. - ----------------------------------------------------------------------------------------------------
As promptly as practicable after any change in the Applicable Spread, the Company shall send written notice to the Trustee in the manner provided in the Indenture stating: (a) that a change in the Applicable Spread on the Notes has occurred and the reason for such change in the Applicable Spread; (b) the Applicable Spread before giving effect to such change; and (c) the Applicable Spread after giving effect to such change. 2. Method of Payment. The Company shall pay interest on the Notes to the Persons who are registered Holders of Notes at the close of business on the fifteenth calendar day, whether or not a Business Day, immediately preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date. The Notes shall be payable as to principal, premium and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided, however, that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest and premium, if any, on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent, Registrar and calculation agent. Initially, The Bank of New York, the Trustee under the Indenture, shall act as Paying Agent, Registrar and Calculation Agent. The Company may change any Paying Agent, Registrar or Calculation Agent without notice to any Holder. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. A-1-6 4. Indenture. The Company issued the Notes under an Indenture dated as of October 22, 1999 ("Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. 5. Optional Redemption. The Company may, at its option, redeem the Notes, in whole or in part, on any Interest Payment Date upon not less than 15 nor more than 45 days' prior notice mailed to the Holders of the Notes to be redeemed. The redemption price shall be equal to the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed, determined as described in the next sentence, that would be due after the related redemption date but for such redemption, discounted to the redemption date on a quarterly basis (on the basis of a 360-day year and the actual number of days elapsed) at LIBOR, as described in the next sentence, plus the Make-Whole Spread. For purposes of this calculation (i) the remaining scheduled payments of interest will be based upon LIBOR, as described below, plus the Applicable Spread which would have been in effect on the date of redemption and (ii) LIBOR will be LIBOR in effect on the second London Business Day preceding the redemption date, except that LIBOR will be representative of deposits in United States dollars equal to the number of months remaining to maturity as of the redemption date. 6. Notice of Redemption. Notice of redemption shall be mailed at least 15 days but not more than 45 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 7. Repurchase. Upon the occurrence of a DTV Sale Event, each Holder of the Notes will have the right to require that the Company repurchase all, but not less than all, of such Holder's Notes at a purchase price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase in accordance with the provisions of Section 4.09 of the Indenture. 8. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $500,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before the mailing of a notice of redemption of Notes to be redeemed or during the period between a record date and the corresponding interest payment date. A-1-7 9. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes. 10. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes voting as a single class, and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented (a) to secure any Notes; (b) to provide for the assumption of the Company's obligations to the Holders of the Notes by a successor to the Company pursuant to Article 5 of the Indenture; (c) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; (d) to cure any ambiguity, defect or inconsistency; (e) to transfer, assign, mortgage or pledge any property to or with the Trustee; (f) to issue additional notes in any aggregate principal amount as contemplated by Section 2.01(e) of the Indenture all of which shall have the same terms, including interest and maturity date, as the Notes; and (g) to evidence the acceptance of appointment by a successor trustee. 11. Defaults and Remedies. Events of Default include: (a) default for 30 days in the payment when due of interest, if any, on the Notes; (b) default in payment when due of the principal of or premium, if any, on the Notes; (c) failure by the Company to comply with any term, covenant or agreement contained in the Indenture, which failure remains uncured for 90 days after notice; (d) default by the Company or by any Restricted Subsidiary on principal of, or interest on, any Debt which default has resulted in acceleration of any portion of such Debt and the aggregate amount of such Debt accelerated is equal to or in excess of $75 million; and (e) certain events of bankruptcy or insolvency with respect to the Company or any of its Restricted Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee semi-annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 12. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company A-1-8 or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 13. No Recourse Against Others. No director, officer, employee, incorporator or stockholder, of the Company, as such, shall have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 14. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 15. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 16. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: Hughes Electronics Corporation 200 North Sepulveda Blvd. El Segundo, California 90245 Attention: Chief Financial Officer 17. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. A-1-9 Assignment Form To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date:_____________ Your Signature:__________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee: ____________________ A-1-10 OPTIONS OF HOLDER TO ELECT PURCHASE If you want to elect to have all of this Note purchased by the Company pursuant to Section 4.09 of the Indenture, check the box: [_] Your Signature:_______________________________ (Sign exactly as your name appears on the other side of the Security) A-1-11 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount Amount of Amount of of this decrease in increase in Global Note Signature of Principal Amount Principal Amount following such authorized Date of of this of this decrease (or Signatory of Exchange Global Note Global Note increase) Trustee or Note Custodian - ---------------------------------------------------------------------------------------------------
A-1-12 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Hughes Electronics Corporation 200 North Sepulveda Blvd. El Segundo, California 90245 The Bank of New York New York, New York 10286 Re: Floating Rate Notes due October 23, 2000 of Hughes Electronics Corporation Reference is hereby made to the Indenture, dated as of October 22, 1999 (the "Indenture"), between Hughes Electronic Corporation; as issuer (the --------- "Company"), and The Bank of New York, as trustee. Capitalized terms used but ------- not defined herein shall have the meanings given to them in the Indenture. ______________, (the "Transferor") owns and proposes to transfer the ---------- Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), -------- to __________ (the "Transferee"), as further specified in Annex A hereto. In ---------- connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [_] Check if Transferee shall take delivery of a beneficial interest in the ----------------------------------------------------------------------- 144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is - ----------------------------------------------------------- being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933 (the "Securities Act"), and, accordingly, the ---------- --- Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note or the Definitive Note and in the Indenture and the Securities Act. 2. [_] Check if Transferee shall take delivery of a beneficial interest in the ----------------------------------------------------------------------- Regulation S Global Note or a Definitive Note pursuant to Regulation S. The - ---------------------------------------------------------------------- Transfer is being effected pursuant to and in accordance with Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was B-1 prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [_] Check and complete if Transferee will take delivery of a beneficial interest in a Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [_] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [_] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [_] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [_] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, if requested by the Trustee or the Company, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Definitive Notes and in the Indenture and the Securities Act. B-2 4. [_] Check and complete if Transferee shall take delivery of a --------------------------------------------------------- beneficial interest in a Definitive Note pursuant to any provision of the - ------------------------------------------------------------------------- Securities Act other than Rule 144A or Regulation S. The Transfer is being - --------------------------------------------------- effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) such Transfer is being effected to the Company or a subsidiary thereof; or (c) such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) if requested by the Company, or the Trustee, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Definitive Notes and in the Indenture and the Securities Act. 5. [_] Check if Transferee shall take delivery of a beneficial interest in an ---------------------------------------------------------------------- Unrestricted Global Note or of an Unrestricted Definitive Note. - --------------------------------------------------------------- B-3 (a) [_] Check if Transfer is pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [_] Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [_] Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. _____________________________________ [Insert Name of Transferor] By:__________________________________ Name: Title: Dated:_______,____ B-4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [_] a beneficial interest in the: (i) [_] 144A Global Note (CUSIP _________), or (ii) [_] Regulation S Global Note (CUSIP _________), or (iii) [_] a Restricted Definitive Note. 2. After the Transfer the Transferee shall hold: [CHECK ONE] (a) [_] a beneficial interest in the: (i) [_] 144A Global Note (CUSIP ________), or (ii) [_] Regulation S Global Note (CUSIP ________), or (iii) [_] Unrestricted Global Note (CUSIP ________); or (b) [_] a Restricted Definitive Note; or (c) [_] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-5 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Hughes Electronic Corporation 200 North Sepulveda Blvd. El Segundo, California 90245 The Bank of New York New York, New York 10286 Re: Floating Rate Notes due October 23, 2000 of Hughes Electronic Corporation (CUSIP______________) Reference is hereby made to the Indenture, dated as of October 22, 1999 (the "Indenture"), between Hughes Electronics Corporation., as issuer (the --------- "Company"), and The Bank of New York, as trustee. Capitalized terms used but ------- not defined herein shall have the meanings given to them in the Indenture. ____________, (the "Owner") owns and proposes to exchange the Note[s] ----- or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with -------- the Exchange, the Owner hereby certifies that: 1. Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note (a) [_] Check if Exchange is from beneficial interest in a -------------------------------------------------- Restricted Global Note to beneficial interest in an Unrestricted Global Note. In - ---------------------------------------------------------------------------- connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933 (the "Securities Act"), (iii) the restrictions on transfer contained -------------- in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [_] Check if Exchange is from beneficial interest in a -------------------------------------------------- Restricted Global Note to Unrestricted Definitive Note. In connection with the - ------------------------------------------------------ Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without C-1 transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [_] Check if Exchange is from Restricted Definitive Note to ------------------------------------------------------- beneficial interest in an Unrestricted Global Note. In connection with the - -------------------------------------------------- Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [_] Check if Exchange is from Restricted Definitive Note to ------------------------------------------------------- Unrestricted Definitive Note. In connection with the Owner's Exchange of a - ---------------------------- Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes (a) [_] Check if Exchange is from beneficial interest in a -------------------------------------------------- Restricted Global Note to Restricted Definitive Note. In connection with the - ---------------------------------------------------- Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued shall continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) [_] Check if Exchange is from Restricted Definitive Note to ------------------------------------------------------- beneficial interest in a Restricted Global Note. In connection with the Exchange - ----------------------------------------------- of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] 144A Global Note, Regulation S Global Note, with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in C-2 compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued shall be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. C-3 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ___________________________________ [Insert Name of Owner] By: _______________________________ Name: Title: Dated: ________________, ____ C-4 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Hughes Electronics Corporation 200 North Sepulveda Blvd. El Segundo, California 90245 The Bank of New York New York, New York 10286 Re: Floating Rate Notes due October 23, 2000 ---------------------------------------- Reference is hereby made to the Indenture, dated as of October 22, 1999 (the "Indenture"), Hughes Electronics Corporation, as issuer (the "Company"), and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) [_] a beneficial interest in a Global Note, or (b) [_] a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of a principal amount of Notes, at the time of transfer of less than $250,000, if requested by the Trustee or the Company, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such D-1 transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ______________________________________________ [Insert Name of Accredited Investor] By:___________________________________________ Name: Title: Dated:________________ D-2 EX-10.5 5 AMEND AGREE REVOLV CREDIT MULTI-YEAR NOV 24, 1999 EXHIBIT 10.5 HUGHES ELECTRONICS CORPORATION AMENDMENT AGREEMENT REGARDING REVOLVING CREDIT AGREEMENT (MULTI-YEAR FACILITY) This AMENDMENT AGREEMENT REGARDING REVOLVING CREDIT AGREEMENT (MULTI- YEAR FACILITY) (this "Amendment") is dated as of November 24, 1999 and entered into by and among HUGHES ELECTRONICS CORPORATION (formerly known as HUGHES NETWORK SYSTEMS, INC.), a Delaware corporation (the "Borrower"), the financial institutions listed on the signature pages hereof (the "Banks"), BANK OF AMERICA, N.A., as the administrative agent for the Banks (in such capacity the "Administrative Agent"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK as syndication agent (the "Syndication Agent") and CITICORP USA, INC. and THE CHASE MANHATTAN BANK as documentation agents (in such capacity the "Documentation Agents") and is made with reference to that certain Credit Agreement (Multi-Year Facility) dated as of December 5, 1997, by and among the Borrower, the lending institutions identified therein, the Administrative Agent, the Syndication Agent and the Documentation Agents (the "Original Agreement"); and as amended by that certain First Amendment to Revolving Credit Agreement (Multi-Year Facility) dated as of December 15, 1998 by and among the Borrower, the lending institutions identified therein, the Administrative Agent, the Syndication Agent and the Documentation Agents (the "First Amendment"; the Original Agreement, as amended by the First Amendment, the "Existing Agreement"). Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Existing Agreement. RECITAL WHEREAS, Borrower and Banks desire, subject to the terms and conditions hereinafter set forth, to amend and restate the Existing Agreement (together with all schedules and exhibits thereto) in its entirety in the form of the Amended and Restated Credit Agreement: NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: 1. AMENDMENT AND RESTATEMENT OF EXISTING AGREEMENT 1.1 Amendment and Restatement of Existing Agreement. On the Amended ----------------------------------------------- and Restated Credit Agreement Effective Date (as defined below), the Existing Agreement (including all schedules and exhibits thereto) shall be and is hereby amended and restated to read in its entirety as set forth in Annex A hereto (as ------- set forth in such Annex A, the "Amended and Restated Credit Agreement"), and as ------- so amended and restated is hereby ratified, approved and confirmed in each and every respect. The rights and obligations of the parties to the Existing Agreement with respect to the period prior to the Amendment Effective Date shall not be affected by such amendment and restatement. -1- 2. CONDITIONS TO EFFECTIVENESS The amendments and modifications referred to in Section 1 of this Amendment Agreement shall become effective only upon the satisfaction on or prior to December 10, 1999 of all of the following conditions precedent and the conditions set forth in Section 5D hereof (the date of satisfaction of such conditions being referred to herein as the "Amended and Restated Credit Agreement Effective Date") (A) On or before the Amended and Restated Credit Agreement Effective Date, Borrower shall deliver to the Banks (or to the Administrative Agent for the Banks with sufficient originally executed copies, where appropriate, for each Bank and its counsel) the following, each, unless otherwise noted, dated the Amended and Restated Credit Agreement Effective Date: (1) A favorable written opinion, dated the Amended and Restated Credit Agreement Effective Date, of the General Counsel or Assistant General Counsel of Borrower in the form set out in Exhibit 1 hereto; (2) Certificate of the Secretary or an Assistant Secretary of Borrower dated the Amended and Restated Credit Agreement Effective Date as to (i) the resolution of the Board of Directors of Borrower or its Executive Committee in connection with this Agreement, and (ii) the incumbency and signatures of the person authorized to execute and deliver this Agreement and any other instrument, document or other agreement required hereunder on the Amended and Restated Credit Agreement Effective Date; and (3) A certificate, signed by the treasurer or an assistant treasurer of Borrower dated the Amended and Restated Credit Agreement Effective Date certifying: (i) that since June 30, 1999, there has been no change in the financial condition, business, operations or properties of Borrower and its Subsidiaries taken as a whole which constitutes a Material Change; and (ii) that no event has occurred and is continuing which constitutes or would constitute an Event of Default or an Unmatured Event of Default. (4) Copies of this Amendment executed by Borrower and Banks constituting the Majority Banks. (B) All fees and other amounts then due to the Administrative Agent, Syndication Agent, Documentation Agent, Arranger and any Bank through the Amended and Restated Credit Agreement Effective Date (including Banks having no Commitment on and after the Amended and Restated Credit Agreement Effective Date) by Borrower shall have been received by such person. (C) On or before the Amended and Restated Credit Agreement Effective Date, all corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto shall be satisfactory in form and substance to the Administrative Agent and such counsel, and the Administrative Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as the Administrative Agent may reasonably request. -2- 3. BORROWER'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Existing Agreement in the manner provided herein, Borrower represents and warrants to each Bank that the following statements are true, correct and complete: (A) Corporate Power and Authority. Borrower has all requisite ----------------------------- corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Existing Agreement as amended by this Amendment (the "Amended Agreement"). (B) Authorization of Agreements. The execution and delivery of this --------------------------- Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Borrower. (C) No Contravention. There is no charter, by-law, or capital stock ---------------- provision of Borrower and no provision of any indenture or material agreement, written or oral, to which Borrower is a party or under which Borrower is obligated, nor is there any statute, rule or regulation, or any judgment, decree or order of any court or agency binding on Borrower which would be contravened by the execution, delivery and performance of any provision, condition, covenant or other term of this Amendment or the Amended Agreement. (D) Binding Obligation. This Amendment and the Amended Agreement ------------------ are the legal, valid and binding obligation of Borrower, enforceable against it in accordance with their terms, and any instrument or agreement required hereunder or by the Amended Agreement, when executed and delivered, will be similarly valid, binding and enforceable. (E) Incorporation of Representations and Warranties From Credit ----------------------------------------------------------- Agreement. The representations and warranties contained in Section 6 (excluding - ---------- Section 6.6) of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Amended and Restated Credit Agreement Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. (F) Absence of Default. No event has occurred and is continuing or ------------------ will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Unmatured Event of Default. 4. MISCELLANEOUS (A) Reference to and Effect on the Credit Agreement and the Other ------------------------------------------------------------- Loan Documents. - --------------- (i) On and after the Amended and Restated Credit Agreement Effective Date, each reference in the Existing Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Existing Agreement, and each reference in the other documents entered pursuant to the Existing Agreement to the "Credit Agreement", "thereunder", -3- "thereof" or words of like import referring to the Existing Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Existing Agreement and the other documents entered pursuant to the Existing Agreement shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. (B) Headings. Section and subsection headings in this Amendment are -------- included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. (C) California Law. The interpretation, enforcement and effect of -------------- this Agreement, the Loans and any agreements, contracts, indentures, documents or instruments delivered in accordance herewith, shall be governed and controlled in all respects by and construed according to the substantive laws of the State of California, to the jurisdiction of whose courts the parties hereto hereby agree to submit. (D) Counterparts; Effectiveness. This Amendment may be executed in --------------------------- any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Borrower and the Majority Banks and receipt by Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] -4- IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto in Los Angeles, California as of the date first hereinabove written. HUGHES ELECTRONICS CORPORATION (formerly known as HUGHES NETWORK SYSTEMS, INC.) By:___________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-1 BANK OF AMERICA, N.A., as Administrative Agent By: Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-2 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Syndication Agent and a Bank By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-3 THE CHASE MANHATTAN BANK, as Documentation Agent, and a Bank By:__________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-4 CITICORP USA, INC., as Documentation Agent and a Bank By:__________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-5 ALLFIRST BANK By:__________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-6 BANCA DI ROMA - SAN FRANCISCO By:__________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-7 BANK OF AMERICA, N.A., as a Bank By:__________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-8 THE BANK OF NEW YORK By:__________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-9 BANK ONE, NA By:__________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-10 CIBC INC. By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-11 CREDIT LYONNAIS NEW YORK BRANCH By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-12 CREDIT SUISSE FIRST BOSTON By:_____________________________________ Name: Title: By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-13 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES By:_____________________________________ Name: Title: By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-14 THE FUJI BANK, LIMITED By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-15 THE INDUSTRIAL BANK OF JAPAN, LIMITED LOS ANGELES AGENCY By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-16 MERCANTILE BANK, NA By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-17 THE MITSUBISHI TRUST AND BANKING CORPORATION, NEW YORK BRANCH By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-18 SANPAOLO IMI SpA By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-19 THE TORONTO-DOMINION BANK By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-20 UNION BANK OF CALIFORNIA, N.A. By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-21 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH By:_____________________________________ Name: Title: By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-22 BANK HAPOALIM B.M. By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-23 BANKERS TRUST COMPANY By:_____________________________________ Name: Title: (Amendment to Amended and Restated Revolving Credit Agreement (Multi-Year)) S-24 EXHIBIT 1 OPINION OF COUNSEL [_________, __], 1999 To: The Banks listed on Schedule A hereto; Bank of America, N.A., as Administrative Agent; Morgan Guaranty Trust Company of New York, as Syndication Agent; and Citicorp USA, Inc. and The Chase Manhattan Bank as Documentation Agents Re: Hughes Electronics Corporation Amended and Restated Revolving Credit Agreement (Multi-Year Facility) Ladies and Gentlemen: I am the Assistant General Counsel of Hughes Electronics Corporation, a Delaware corporation (the "Borrower"), in connection with the Amended and Restated Revolving Credit Agreement (Multi-Year Facility) dated as of November 24, 1999 (the "Credit Agreement") by and among Borrower, the banks named therein (the "Banks"), Bank of America, N.A., as administrative agent for the Banks (in such capacity "Administrative Agent"), Morgan Guaranty Trust Company of New York, as Syndication Agent and Citicorp USA, Inc. and The Chase Manhattan Bank as Documentation Agents; which Credit Agreement is being implemented pursuant to the Amendment Agreement Regarding Revolving Credit Agreement (Multi-Year Facility) dated as of November 24, 1999 among the Borrower, Banks constituting the Majority Banks, the Administrative Agent, the Syndication Agent and the Documentation Agents (the "Amendment Agreement"). Capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement. This opinion is rendered to you pursuant to Section 2(A)(1) of the Amendment Agreement. As Assistant General Counsel to Borrower, I have caused to be made such legal and factual examinations and inquiries, including an examination of originals or copies, certified or otherwise identified to my satisfaction as authentic, of such corporate records, agreements, instruments and other documents as I have deemed necessary or appropriate for the purposes of this opinion. I have caused to be obtained such certificates and other assurances (copies of which have been delivered to you) from public officials and officers and other employees of Borrower as I considered necessary or appropriate for the purpose of rendering this opinion. I have assumed the genuineness of all signatures (except that of Borrower), the authenticity of all documents submitted to me as originals, and the conformity with the originals of all documents submitted to me as copies. Subject to the limitations herein set forth, I am opining herein as to the effect on the subject transaction only of United States federal law, the laws of the State of California and the General Corporation Law of the State of Delaware. I am licensed to practice law in the State of California. I assume no responsibility as to the applicability to the subject transaction or the effect thereon of the laws of any other jurisdiction. Based upon the foregoing and in reliance thereon, and subject to the qualifications, limitations and assumptions set forth herein, I am of the opinion that, as of the date hereof: 1. Borrower has been duly incorporated, and is validly existing in good standing under the laws of the State of Delaware with corporate power to own its properties and assets, to enter into the Amendment Agreement and the Credit Agreement, and to perform its obligations under the Amendment Agreement and the Credit Agreement. 2. The execution, delivery and performance of the Amendment Agreement and the Credit Agreement by Borrower have been duly authorized by all necessary corporate action on the part of Borrower, the Amendment Agreement has been duly executed and delivered by Borrower, and the Amendment Agreement and the Credit Agreement constitute the legally valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms. 3. To my knowledge, after causing to be conducted such legal and factual examination and inquiries and causing to be conducted such discussions with and obtaining such certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, no consent, permission, authorization, order or license of any United States federal or California governmental authority is necessary in connection with the execution and delivery of the Credit Agreement by Borrower and Borrower's performance of its obligations under the Credit Agreement. 4. There is no provision of the Certificate of Incorporation or the By- laws of Borrower which would be contravened by the execution and delivery of the Amendment Agreement by Borrower or by the performance by Borrower of its obligations under the Amendment Agreement and the Credit Agreement. 5. To my knowledge, after causing to be conducted such legal and factual examination and inquiries and causing to be conducted such discussions with and obtaining such certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, no consent or approval of any trustee or holder of any material indebtedness of Borrower is necessary in connection with the execution and delivery of the Amendment Agreement by Borrower and Borrower's performance of its obligations under the Amendment Agreement and the Credit Agreement. 6. There is no provision of any indenture or material agreement for borrowed money to which Borrower is a party or under which Borrower is obligated, and of which I am aware, after causing to be conducted such legal and factual examinations and inquiries and causing to be conducted such discussion with and obtaining such certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, which would be contravened by the execution and delivery of the Amendment Agreement and the Notes by Borrower or by the performance by Borrower of its obligations under the Amendment Agreement and the Credit Agreement. The opinion expressed in paragraph 6 is subject to the following limitations, qualifications, exceptions and assumptions: (a) the enforcement of the Amendment Agreement, the Credit Agreement, and the Notes may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws or by equitable principles relating to or limiting the rights of creditors generally; (b) the use of the term enforceable shall not imply any opinion as to the availability of equitable remedies; (c) I advise you that a California court may not strictly enforce certain covenants contained in the Amendment Agreement and the Credit Agreement or allow acceleration of the maturity of the indebtedness thereunder if it concludes that such enforcement or acceleration would be unreasonable under the then existing circumstances. I do believe, however, that subject to the limitations expressed elsewhere in this opinion, enforcement or acceleration would be available if an Event of Default occurs as a result of a material breach of a material covenant contained in the Credit Agreement; (d) The effect of California court decisions, invoking statutes or principles of equity, which have held that certain covenants and provisions of agreements are unenforceable where (i) the breach of such covenants or provisions imposes restrictions or burdens upon the debtor, including the acceleration of indebtedness due under debt instruments, and it cannot be demonstrated that the enforcement of such restrictions or burdens is reasonably necessary for the protection of the creditor, or (ii) the creditor's enforcement of such covenants or provisions under the circumstances would violate the creditor's implied covenant of good faith and fair dealing; (e) The unenforceability under certain circumstances, under California or federal law or court decisions, of provisions expressly or by implication waiving broadly or vaguely stated rights, unknown future rights, defenses to obligations or rights granted by law, where such waivers are against public policy or prohibited by law; (f) The unenforceability under certain circumstances of provisions to the effect that rights or remedies are not exclusive, that every right or remedy is cumulative and may be exercised in addition to or with any other right or remedy, that election of a particular remedy or remedies does not preclude recourse to one or more other remedies or that failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any such right or remedy; (g) The effect of Section 1717 of the California Civil Code, which provides that, where a contract permits one party to the contract to recover attorneys' fees, the prevailing party in any action to enforce any provision of the contract shall be entitled to recover its reasonable attorneys' fees; (h) The unenforceability under certain circumstances of provisions indemnifying a party against liability for its own wrongful or negligent acts or where such indemnification is contrary to public policy or prohibited by law; and (i) The enforceability under certain circumstances of provisions imposing penalties, forfeitures, late payment charges or an increase in interest rate upon delinquency in payment or the occurrence of a default. To the extent that the obligations of Borrower may be dependent upon such matters, I assume for purposes of this opinion that each of the Banks is duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization; that each of the Banks is duly qualified to engage in the transaction covered by this opinion; that the Amendment Agreement has been duly authorized, executed and delivered by each of the Banks and that the Amendment Agreement and the Credit Agreement constitute the valid and binding obligation of each of the Banks, enforceable in accordance with its terms; and that each of the Banks has the requisite corporate or organizational and legal power and authority to own its properties, to carry on its business as now being conducted and to perform its obligations under the Amendment Agreement and the Credit Agreement, including without limitation, to make the loans under the Credit Agreement. I am not expressing any opinion as to the effect of or the compliance by any Bank with any state or federal laws or regulations applicable to the transactions because of the nature of its respective business. This opinion is rendered to the Banks and Administrative Agent as of the date hereof in connection with the above transaction, and may not be relied upon by any person other than the Administrative Agent and the Banks and their permitted assignees, or by them in any other context, and may not be furnished to, quoted to or relied upon by any other person, firm or corporation for any purpose without my prior written consent; provided that each Bank and its -------- permitted assignees may provide this opinion (i) to bank examiners and other regulatory authorities should they so request or in connection with their normal examination, (ii) to the independent auditors and attorneys of such Bank, (iii) pursuant to order or legal process of any court or governmental agency, (iv) in connection with any legal action to which the Bank is a party arising out of the transactions contemplated by the Amendment Agreement and the Credit Agreement, or (v) in connection with the assignment of or sale of participations in the Loans. Very truly yours, SCHEDULE A TO OPINION OF COUNSEL Bankers Trust Company Credit Suisse First Boston The Long-Term Credit Bank of Japan, Ltd., Los Angeles Agency The Mitsubishi Trust & Banking Corporation, New York Branch NationsBank of Texas, N.A. The Toronto-Dominion Bank Banca di Roma - San Francisco Branch The Bank of New York CIBC Inc. Credit Lyonnais New York Branch Deutsche Bank AG New York and/or Cayman Islands Branches The First National Bank of Chicago First National Bank of Maryland The Fuji Bank, Limited, Los Angeles Agency The Industrial Bank of Japan, Limited, Los Angeles Agency Istituto Bancario San Paolo di Torino SpA Union Bank of California EX-10.6 6 CREDIT AGREEMENT, DATED 6/13/1999 EXHIBIT 10.6 CREDIT AGREEMENT among SURFIN LTD., certain DESIGNATED SUBSIDIARIES and THE BANKS NAMED HEREIN BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Syndication Agent DEUTSCHE BANK AG, NEW YORK AND CAYMAN ISLANDS BRANCHES, as Documentation Agent THE CHASE MANHATTAN BANK THE FIRST NATIONAL BANK OF CHICAGO MORGAN GUARANTY TRUST COMPANY OF NEW YORK and WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK AND CAYMAN ISLANDS BRANCHES, as Senior Managing Agents and CITICORP USA, INC. as Administrative Agent Dated as of June 3, 1999 Arranged By SALOMON SMITH BARNEY INC. TABLE OF CONTENTS -----------------
Page ---- SECTION 1.................................................................. 1 DEFINITIONS................................................................ 1 1.1 Definitions.......................................................... 1 SECTION 2.................................................................. 11 THE CREDIT................................................................. 11 2.1 The Commitments...................................................... 11 2.2 Loans made to the Borrower and the Designated Subsidiaries........... 12 2.3 Requests for Reference Rate and Eurodollar Loans..................... 12 2.4 Guaranty............................................................. 12 2.5 Interest and Principal on Reference Rate Loans....................... 12 2.6 Interest and Principal on Eurodollar Loans........................... 13 2.7 Loan Accounts........................................................ 13 2.8 Conversion of Loans Between Eurodollar Loans and Reference Rate Loans and Conversion of Interest Periods of Eurodollar Loans......... 13 2.9 Disbursements and Payments........................................... 14 2.10 Facility Fee......................................................... 15 2.11 Issuance of Letters of Credit and Banks' Purchase of Participations in Participated Letters of Credit..................... 16 2.12 Letter of Credit Fees................................................ 19 2.13 Drawings and Reimbursement of Amounts Paid Under Letters of Credit... 20 2.14 Obligations Absolute................................................. 23 2.15 Indemnification; Nature of Issuing Banks' Duties..................... 24 2.16 Increased Costs and Taxes Relating to Letters of Credit.............. 26 2.17 Survival of Certain Provisions Relating to Letters of Credit......... 27 SECTION 3.................................................................. 27 PAYMENT OF COSTS AND REDUCTION............................................. 27 3.1 Indemnification Upon Failure to Pay Eurodollar Loan.................. 27 3.2 Increased Costs...................................................... 27 3.3 Taxes................................................................ 29 3.4 Prepayment........................................................... 29 3.5 Pro Rata Reduction of Commitments by Borrower........................ 29
3.6 Reduction of One Bank's Commitment by Borrower....................... 30 3.7 Notice of Reductions................................................. 30 3.8 Designation of Replacement Bank...................................... 30 3.9 Effect of Reduction of Commitment.................................... 30 3.10 Accrued Fees......................................................... 31 3.11 Survival............................................................. 31 SECTION 4.................................................................. 31 CHANGE IN CIRCUMSTANCES AFFECTING LOANS.................................... 31 4.1 Inability to Determine Eurodollar Rate............................... 31 4.2 Illegality........................................................... 31 SECTION 5.................................................................. 32 CONDITIONS PRECEDENT....................................................... 32 5.1 Initial Conditions Precedent......................................... 32 5.2 Conditions Precedent to Loans........................................ 34 5.3 Conditions to Letter of Credit....................................... 35 SECTION 6.................................................................. 35 REPRESENTATIONS AND WARRANTIES............................................. 35 6.1 Authority of Borrower................................................ 35 6.2 Binding Obligations.................................................. 36 6.3 Incorporation of Subsidiaries........................................ 36 6.4 No Contravention..................................................... 36 6.5 Notices.............................................................. 36 6.6 Financial Statements................................................. 36 6.7 ERISA................................................................ 36 6.8 Use of Proceeds; Margin Regulations; Investment Act.................. 36 6.9 Taxes................................................................ 37 6.10 Insurance............................................................ 37 6.11 Liens................................................................ 37 6.12 Absence of Litigation; Litigation Description........................ 37 6.13 Authorizations and Approvals......................................... 37 6.14 Taxes................................................................ 37 6.15 Enforcement.......................................................... 38 6.16 Authority of Designated Subsidiaries................................. 38
6.17 Year 2000 Compliance................................................ 38 SECTION 7................................................................. 39 AFFIRMATIVE COVENANTS OF BORROWER......................................... 39 7.1 Use of Proceeds of Loans............................................ 39 7.2 Management of Business.............................................. 39 7.3 Notice of Certain Events............................................ 39 7.4 Records............................................................. 39 7.5 Information Furnished............................................... 40 7.6 Execution of Other Documents........................................ 40 7.7 Administrative Agent's and Arranger's Fees.......................... 40 7.8 Compliance with Law................................................. 40 7.9 Maintenance of Properties, Etc...................................... 41 SECTION 8................................................................. 41 NEGATIVE COVENANTS OF BORROWER............................................ 41 8.1 Liens............................................................... 41 8.2 Mergers, Liquidations and Sales of Assets........................... 42 8.3 Compliance with Margin Regulations.................................. 43 8.4 Compliance with Law, etc............................................ 43 8.5 Change in Business.................................................. 43 8.6 Ownership of Designated Subsidiaries................................ 43 8.7 ERISA............................................................... 43 SECTION 9................................................................. 43 EVENTS OF DEFAULT......................................................... 43 9.1 Events of Default................................................... 43 9.2 Recovery of Amounts Due............................................. 47 9.3 Rights Cumulative.................................................... 47 9.4 Letters of Credit and Accepted Time Drafts.......................... 47 SECTION 10................................................................ 48 THE BANKS................................................................. 48 10.1 Administration of Loan.............................................. 48 10.2 Representations By Banks............................................ 48 SECTION 11................................................................ 49 MISCELLANEOUS PROVISIONS.................................................. 49
11.1 Amendments and Waivers............................................. 49 11.2 Notices............................................................ 49 11.3 Waiver............................................................. 50 11.4 New York Law....................................................... 50 11.5 Headings........................................................... 50 11.6 Accounting Terms................................................... 50 11.7 Counterparts....................................................... 50 11.8 Written Disclosure................................................. 50 11.9 Singular; Plural................................................... 50 11.10 Illegality......................................................... 50 11.11 Assignments and Participations..................................... 51 11.12 Obligations Several................................................ 54 11.13 Fees and Expenses.................................................. 54 11.14 Indemnity.......................................................... 54 11.15 Confidentiality.................................................... 55 11.16 Right of Set-off................................................... 55 11.17 Judgment........................................................... 55 11.18 No Immunity........................................................ 56 11.19 Proceedings, Etc................................................... 56 11.20 Jury Trial Waiver.................................................. 56
SCHEDULES 1 Banks and Commitments EXHIBITS A Form of Loan Request B Relations Among the Banks and Administrative Agent C Addresses and Lending Offices of Banks D Form of Hughes Guaranty E Form of Guaranty of Darlene F-1 Form of Opinion of Bahamas Counsel to Borrower F-2 Form of Opinion of Netherlands Counsel for White Holding G Form of Opinion of New York Counsel to Borrower H-1 Form of Opinion of Assistant General Counsel to Hughes H-2 Form of Opinion of Counsel to Other Guarantor I Form of Opinion of Special Counsel to Administrative Agent J Form of Assignment and Acceptance K Form of L/C Request CREDIT AGREEMENT THIS CREDIT AGREEMENT is entered into as of June 3, 1999, (this Credit Agreement as it may be amended, supplemented or modified from time to time being referred to herein as this "Agreement") among SurFin Ltd., an international business company organized and existing under the laws of the Bahamas ("Borrower"), the Designated Subsidiaries (as defined below), the Banks (as defined below), Bank of America National Trust and Savings Association, as syndication agent ("Syndication Agent"), Deutsche Bank, AG, New York and Cayman Islands Branches, as documentation agent ("Documentation Agent"), and The Chase Manhattan Bank, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York and Westdeutsche Landesbank Girozentrale-New York and Cayman Islands Branches, as senior managing agents ("Senior Managing Agents"), and Citicorp USA, Inc., as administrative agent for Banks (in such capacity "Administrative Agent"). SECTION 1 --------- DEFINITIONS ----------- 1.1 Definitions. ----------- "Accepted Time Draft" means a draft presented under a Usance Letter of Credit which has been accepted by the Issuing Bank of such Usance Letter of Credit. "Adjusted Exposure" means, with respect to any Bank, as at any date of determination, the sum (without duplication) of (i) the aggregate principal amount of all outstanding Loans made by such Bank (other than Loans made for the purpose of reimbursing the applicable Issuing Bank for any amount drawn under any Participated Letter of Credit but not yet so applied) plus (ii) such Bank's ---- share based on its Percentage of the maximum aggregate amount which is or at any time thereafter may become available for drawing under all Participated Letters of Credit then outstanding plus (iii) such Bank's share based on its Percentage ---- of the aggregate amount of all payments in respect of drawing under Participated Letters of Credit honored by Issuing Banks and payments of Accepted Time Drafts and not theretofore reimbursed by the Obligors (including any such reimbursements out of the proceeds of Loans pursuant to Section 2.13(b)) plus ---- (iv) the maximum aggregate amount which is or at any time thereafter may become available for drawing under all Non-Participated Letters of Credit issued by such Bank or its Designated Issuer then outstanding plus (v) the aggregate ---- amount of all payments in respect of drawings under all Non-Participated Letters of Credit honored by such Bank or its Designated Issuer and payments of Accepted Time Drafts created under such Non-Participated Letters of Credit issued by such Bank or its Designated Issuer and not theretofore reimbursed by the Obligors. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by, or is under common control with, such Person. "Applicable Margin" shall mean with respect to any day in relation to any Eurodollar Loan, the percentages set forth below correlating to the Total Utilization of the Commitments and the Level applicable to Long-term Debt on such day: Applicable Margin (in basis points) Total Utilization of the Commitments as a Percentage of Total Commitment
Greater than or equal to 35% but Greater than or Level Less than 35% less than 65% equal to 65% ----------- ----------------- ------------------ ----------------- Level 1 27.50 40.00 52.50 Level 2 47.50 60.00 72.50 Level 3 57.50 70.00 82.50 Level 4 62.50 75.00 87.50
The Applicable Margin shall be adjusted daily to reflect changes in the Total Utilization of the Commitments and the Level applicable to Long-term Debt. The applicable Level shall be determined by the Administrative Agent on the basis of timely information furnished to it by Borrower, Hughes, Moody's or S&P with respect to the rating on Long-term Debt; any change in the Level shall be effective on the earlier of the date on which such rating change is publicly announced or on the date written confirmation of a change in the rating on Long-term Debt is sent to Borrower or Hughes, by Moody's or S&P. "Approved Bank Affiliate" means a Person that is a subsidiary of a Bank or of a Person of which a Bank is a subsidiary, and which is either engaged primarily in the business of lending or, if not so engaged, which has been approved by Borrower and Administrative Agent; provided that Borrower's approval -------- shall not be unreasonably withheld. "Arranger" means Salomon Smith Barney Inc. "Assignment and Acceptance" means an Assignment and Acceptance Agreement substantially in the form of Exhibit J. "Availability Period" means the period commencing on the Effective Date and ending on the Termination Date. "Bank" means each financial institution listed on the signature pages hereof, each Person which becomes a Bank pursuant to Section 3.8 or 11.11 and their respective successors, provided that for purposes of any determination made with respect to CUSA under Sections 3.1, 3.2, 3.3, or 4.2, "Bank" shall be deemed to include Citibank. "Borrowing Date" means a date on which funds are advanced to an Obligor by one or more Banks pursuant to a Loan Request. 2 "Business Day" means a day other than a Saturday or Sunday on which banks are open for business in both Los Angeles, California and New York, New York. "Citibank" means Citibank, N.A. "Commercial Letter of Credit" means any letter of credit issued for the purpose of providing the primary payment mechanism, through the presentation of documentation such as drafts and bills of lading, in connection with the purchase of materials, goods or services by Borrower or any of its Subsidiaries in the ordinary course of business of Borrower or such Subsidiary. "Commitment" of each Bank means the dollar amount set forth opposite such Bank's name on Schedule 1 hereto as such amount may be reduced or changed pursuant to Sections 3.5, 3.6 and 11.11. "Total Commitment" means the aggregate amount of the Commitments. "CUSA" means Citicorp USA, Inc. in its capacity as a Bank. "Designated Issuer" means a financial institution which has been designated by a Bank as such Bank's "Designated Issuer" for purposes of issuing Letters of Credit and (i) in the case of a Bank which is a party to this Agreement on the Effective Date, which has executed this Agreement, and (ii) in each other case shall have executed this Agreement and shall have been consented to by Borrower, which consent shall not be unreasonably withheld. "Designated Subsidiary" means each of Dish Placement Services, Ltd., an international business company organized and existing under the laws of the Bahamas, and White Holding, each of which is a wholly-owned Subsidiary of Borrower, and "Designated Subsidiaries" means both of such entities collectively. "Dish Placement" means Dish Placement Services, Ltd., an international business company organized and existing under the laws of the Bahamas. "Dollars", "dollars" and "$" each mean lawful money of the United States. "Effective Date" means the date this Agreement shall have been executed and delivered by the parties hereto and the conditions precedent set forth in Section 5.1 shall have been satisfied. "Eligible Assignee" means (i) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; or (iii) any Person engaged in the business of lending. 3 "ERISA" means the Employee Retirement Income Security Act of 1974, as in effect from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with Borrower or any Subsidiary of Borrower within the meaning of Section 414(b), 414(c) or 414(m) of Internal Revenue Code of 1986, as amended. "Eurodollar Banking Day" means a day on which banks are open for business in Los Angeles, California, New York, New York and the applicable offshore dollar interbank market and are dealing in U.S. Dollar deposits. "Eurodollar Loan" means a Loan at the rate of interest calculated pursuant to Section 2.6. "Eurodollar Rate" means for each Interest Period of a Eurodollar Loan the arithmetic mean of the rates of interest rounded to the nearest 1/100 of one percent as notified to the Administrative Agent by the Reference Banks at which U.S. Dollar deposits for such Interest Period and in an amount comparable to the Principal Amount of such Eurodollar Loan would be offered by such Reference Banks to major banks in the offshore dollar interbank market upon request of such banks at approximately 11:00 a.m. London time two (2) Eurodollar Banking Days prior to the first day of such Interest Period. "Event of Default" means any event specified in Section 9.1. "Existing Citibank Agreement" means the Credit Agreement dated as of September 18, 1996, as amended, among Borrower, the Designated Subsidiaries, the banks party thereto, and Citicorp USA, Inc. as agent for such banks. "Facility Fee" has the meaning assigned to such term in Section 2.10. "Federal Funds Rate" means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)." If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m. Quotation") for such day under the caption "Federal Funds Effective Rate." If on any relevant day the appropriate rate for such previous day is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by Administrative Agent. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System, or any successor thereto. 4 "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statements by such other entity as may be in general use by significant segments of the U.S. accounting profession, which are applicable to the circumstances as of the date of determination. "GLA" means Galaxy Latin America LLC, a limited liability company organized in Delaware and domiciled in Costa Rica. "Good Faith" has the meaning assigned to such term in Section 1-201 of the New York Uniform Commercial Code. "Guarantor" means each of Hughes, Darlene Investments LLC and any "Successor Guarantor" (as defined in the Guaranties), and "Guarantors" means such entities collectively. "Guarantor Notice Agent" means GLA, as notice agent under the Guaranties (other than the Hughes Guaranty). "Guaranty" means any Guaranty in the form of Exhibit D or Exhibit E hereto, as the case may be, dated as of the date hereof, executed and delivered by a Guarantor, as it may be amended from time to time, and "Guaranties" means, collectively, all such Guaranties. "Hedging Obligations", as applied to any Person, means any and all indebtedness, liabilities and other monetary obligations of such Person under any interest rate swap, "cap", "collar" or other hedging agreements. "Hughes" means Hughes Electronics Corporation, a Delaware corporation. "Hughes Credit Agreement" means the Revolving Credit Agreement dated as of December 5, 1997, among Hughes Electronics Corporation, the banks named therein and Bank of America National Trust and Savings Association, as Administrative Agent, as amended from time to time; provided that if such -------- Revolving Credit Agreement is terminated and replaced by another credit agreement or credit agreements, "Hughes Credit Agreement" shall mean such replacement credit agreement (or if there is more than one replacement credit agreement, the replacement credit agreement having the greatest aggregate lenders' commitments), as amended from time to time, and references herein to certain provisions of such Revolving Credit Agreement shall be deemed to refer to equivalent provisions, if any, in such replacement credit agreement; provided -------- further that if the Hughes Credit Agreement is terminated and is not replaced by - ------- another credit agreement or credit agreements (including, without limitation, in connection with the assumption of the Hughes Guaranty pursuant to Section 8(a) of the Hughes Guaranty by a Successor Guarantor), "Hughes Credit Agreement" shall mean the Hughes Credit Agreement as in effect immediately prior to such termination and such Successor Guarantor shall be deemed to be a "Borrower" thereunder. 5 "Hughes Guaranty" means the Guaranty in the form of Exhibit D hereto, dated as of the date hereof, executed and delivered by Hughes as the Guarantor, as it may be amended from time to time. "Indebtedness", as applied to any Person, means (i) all indebtedness for borrowed money, (ii) that portion of obligations with respect to capital leases that is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA), which purchase price is (a) due more than six months from the date of incurrence of the obligations in respect thereof or (b) evidenced by a note or similar written instrument, (v) any direct or indirect liability, contingent or otherwise, of that Person (the "obligor") with respect to the obligor's reimbursement obligations to any other Person who has provided assurance to the obligee of obligor's primary obligation that such primary obligation will be paid or discharged, and (vi) all indebtedness described in clauses (i) through (v) above secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person. "Interest Payment Date" means, with respect to each Eurodollar Loan, the last day of each Interest Period; provided, however, that if any Interest -------- ------- Period exceeds three (3) months, "Interest Payment Date" shall mean the day that is three months after the beginning of the relevant Interest Period, as well as the last day of the relevant Interest Period; and, with respect to each Reference Rate Loan, means the last day of each March, June, September and December, and the Termination Date. If any day specified herein is not a Business Day or, in the case of a Eurodollar Loan, a Eurodollar Banking Day, then the relevant Interest Payment Date shall be the next succeeding Business Day or Eurodollar Banking Day, as applicable, except as otherwise provided in the definition of Interest Period. "Interest Period" means with respect to each Eurodollar Loan, a period of one (1), two (2), three (3) or six (6) months as selected by the applicable Obligor by a Loan Request delivered to Administrative Agent in accordance with Section 2.3, subject to the following: (a) The first Interest Period for each Loan shall commence on the date such Loan is disbursed and each succeeding Interest Period for such Loan shall commence on the last day of the preceding Interest Period for such Loan; (b) If the last day of an Interest Period falls on a day that is not a Eurodollar Banking Day, the Interest Period involved shall be extended to the next following Eurodollar Banking Day unless as a result thereof it would fall into the next calendar month, in which case the end of the Eurodollar Interest Period shall be the preceding Eurodollar Banking Day, and in either case the next succeeding Eurodollar Interest Period shall be measured from the last day of the Interest Period as so adjusted; (c) If an Interest Period for a Eurodollar Loan commences on the last Eurodollar Banking Day of a calendar month, it shall end on the last Eurodollar Banking Day of a calendar month; 6 (d) No Interest Period shall end on a day later than the Termination Date; and (e) No more than ten (10) Interest Periods shall be outstanding at any one time. "Issuing Bank" means, with respect to any Letter of Credit, the Bank or Designated Issuer which agrees or is otherwise obligated to issue such Letter of Credit, determined as provided in Section 2.11(b)(ii). "L/C Request" means a notice substantially in the form of Exhibit K --------- hereto delivered by an Obligor to Administrative Agent or the Issuing Bank, as the case may be, pursuant to Section 2.11(b)(i) with respect to the proposed issuance of a Letter of Credit. "Lending Office" means with respect to any Bank as the context shall require, the branch office of such Bank designated as the Lending Office of such Bank in Exhibit C attached hereto and incorporated herein by reference; or any other branch office or affiliate of such Bank hereafter selected and notified to Borrower and Administrative Agent from time to time by such Bank; provided that any Bank may from time to time by notice to Borrower and Administrative Agent designate separate Lending Offices for its Eurodollar Loans and/or its Reference Rate Loans; and in such case any reference to the Lending Office of such Bank shall be deemed to refer to any or all of such offices, branches or affiliates as the context may require. "Letter Agreement" means that letter agreement among Arranger, Administrative Agent and Borrower dated May 18, 1999 specifying Arranger's and Administrative Agent's compensation for services hereunder as such letter agreement may from time to time be amended, restated, reissued or otherwise modified. "Letter of Credit" or "Letters of Credit" means Participated Letters of Credit and Non-Participated Letters of Credit, in each case which are either Commercial Letters of Credit or Standby Letters of Credit. "Letter of Credit Collateral" has the meaning assigned to such term in Section 9.4(b). "Letter of Credit Collateral Account" has the meaning assigned to such term in Section 9.4(a). "Letter of Credit Obligations" has the meaning assigned to such term in Section 9.4(a). "Letter of Credit Usage" means, as at any date of determination, the sum (without duplication) of (i) the maximum aggregate amount which is or at any time thereafter may become available for drawing under all Letters of Credit then outstanding plus (ii) the aggregate amount of all outstanding Accepted Time ---- Drafts plus (iii) the aggregate amount of all payments in respect of drawings ---- under Letters of Credit honored by Issuing Banks and payments of Accepted Time Drafts and not theretofore reimbursed by the Obligors (including any such reimbursement out of the proceeds of Loans pursuant to Section 2.13(b)). 7 "Level" means Level 1, Level 2, Level 3 or Level 4, as applicable. "Level 1" shall mean that Long-term Debt carries one or both of the following ratings: "A-" or higher by S& P "A3" or higher by Moody's "Level 2" shall mean that the criteria of Level 1 are not satisfied and Long-term Debt carries one or both of the following ratings: "BBB+" or higher by S&P "Baa1" or higher by Moody's "Level 3" shall mean that the criteria of neither Level 1 nor Level 2 are satisfied and Long-term Debt carries one or both of the following ratings: "BBB" or higher by S&P "Baa2" or higher by Moody's "Level 4" shall mean that none of the criteria of Level 1, Level 2 or Level 3 are satisfied. "Lien" means any trust deed, mortgage, pledge, hypothecation, assignment, security interest, lien, charge or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the lien of an attachment, judgment or execution, or any conditional sale or other title retention agreement, any capitalized lease, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction, but excluding financing statements filed to give notice of leases in the ordinary course of business). "Loan" or "Loans" means the loans described in Section 2, any of which may be at any time Reference Rate Loans or Eurodollar Loans. "Loan Documents" means this Agreement, the Notes, the Letters of Credit (and any applications for, or reimbursement agreements or other documents or certificates executed by the Obligors in favor of an Issuing Bank relating to, the Letters of Credit), the Accepted Time Drafts, the Guaranties and all other agreements and documents executed in connection therewith. "Loan Request" means a notice given by an Obligor pursuant to Section 2.3 hereof. "LOC" means a company organized and operating in Mexico, the Caribbean or a country located in Central America or South America which operates a direct-to-home satellite television system in such country, and "LOC's" means all such operating companies, collectively. 8 "Long-term Debt" shall mean senior, unsecured, non-credit-enhanced public long-term debt securities of Hughes or any Successor Guarantor. "Majority Banks" means, upon the occurrence and during the continuance of an Event of Default pursuant to subsection 9.1(a), those Banks whose aggregate Adjusted Exposure constitutes at least sixty percent (60%) of the Total Utilization of Commitments at such time; otherwise, those Banks whose Commitments constitute at least sixty percent (60%) of the Total Commitment as such Total Commitment may be adjusted from time to time pursuant to the terms of this Agreement. "Material Change" means any adverse change which could reasonably be expected to materially impair the Obligors' ability to timely and fully perform their obligations under this Agreement or the ability of Hughes or Successor Guarantor to timely and fully perform its obligations under the Hughes Guaranty. "Moody's" means Moody's Investors Service, Inc. "Non-Participated Letter of Credit" has the meaning assigned to such term in subsection 2.11(a). "Note" means any promissory note delivered pursuant to Section 2.7 (collectively, the "Notes"). "Obligor" means the Borrower and each of the Designated Subsidiaries. "Participated Letter of Credit" has the meaning assigned to such term in subsection 2.11(a). "Percentage" means, with respect to each Bank, the percentage under the heading "Percentage" set forth opposite such Bank's name on Schedule 1 hereto, as such Percentage may be adjusted in accordance with the provisions of Section 3.6 or 11.11. "Person" means any individual, firm, company, corporation, joint venture, joint-stock company, limited liability company, trust, unincorporated organization, governmental or state entity, or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing. "Plan" means any employee benefit pension plan which is subject to the provisions of Title IV of ERISA and which is maintained for employees of Borrower or any ERISA Affiliate. "Principal Amount" means, when used with reference to any Loan, the amount requested in the Loan Request relating thereto and made available to an Obligor by the Banks hereunder. "Principal Repayment Date" means, with respect to each Reference Rate Loan, the Termination Date, and with respect to each Eurodollar Loan, the last day of the Interest Period for such Loan. 9 "Reference Banks" means Citibank, Bank of America National Trust and Savings Association and Deutsche Bank AG New York and/or Cayman Islands Branches. "Reference Rate" means, for any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the highest of: (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate (which is a rate set by Citibank based upon various factors including Citibank's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate); (b) the sum of (A) 1/2 of one percent per annum, plus (B) the rate ---- obtained by dividing (x) the latest three-week moving average of -------- secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks (such three-week moving average being determined weekly by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank, in either case adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent), by -- (y) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement (including, but not limited to, any marginal reserve requirements for Citibank in respect of liabilities consisting of or including (among other liabilities) three-month nonpersonal time deposits of at least $100,000), plus (C) the average during such ---- three-week period of the daily net annual assessment rates estimated by Citibank for determining the current annual assessment payable by Citibank to the Federal Deposit Insurance Corporation for insuring three-month deposits in the United States; or (c) 1/2 of one percent per annum above the Federal Funds Rate. "Reference Rate Loan" means a Loan at a rate of interest calculated pursuant to Section 2.5. "Register" is defined in Section 11.11(c). "Reimbursement Date" has the meaning assigned to that term in Section 2.13(b). "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc. "Standby Letter of Credit" means any letter of credit other than a Commercial Letter of Credit issued for the purpose of supporting performance, payment, deposit or surety obligations of GLA, any LOC, Borrower or any of its Subsidiaries. 10 "Subsidiaries" (individually a "Subsidiary") means those corporations or entities of which Borrower owns more than fifty percent (50%) of the voting securities. If Borrower (i) acquires similar ownership of or control over any other corporation or entity, such corporation or entity shall thereupon be deemed a Subsidiary for all purposes hereof, or (ii) subject to the terms hereof, permits its ownership to fall to fifty percent (50%) or below of outstanding voting shares or otherwise disposes of control of any Subsidiary, such Subsidiary shall thereupon cease to be a Subsidiary for all purposes hereof. "Successor Guarantor" has the meaning assigned to such term in Section 8(a) of the Hughes Guaranty. "Tax" and "Taxes" mean (i) all taxes, levies, imposts, duties, fees or other charges of whatsoever nature however imposed by any country or any subdivision or authority of or in that country in any way connected with this Agreement or any instrument or agreement required hereunder, and all interest, penalties or similar liabilities with respect thereto, except such taxes as are imposed on or measured by any Bank's net income or capital and franchise taxes, by the country or any subdivision or authority of or in that country in which such Bank's principal office or actual Lending Office is located and (ii) any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement. "Termination Date" means June 3, 2002 or if such day is not a Business Day, the next preceding Business Day. "Total Utilization of Commitments" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Loans (other than Loans made for the purpose of reimbursing the applicable Issuing Bank for any amount drawn under any Letter of Credit but not yet so applied) plus (ii) the Letter of Credit Usage, plus (iii) the aggregate ---- ---- principal amount of all outstanding loans to any Obligor under any overdraft facility provided by Citibank to the Obligors. "Unmatured Event of Default" means an event or condition which with the passage of time or the giving of notice, or both, would become an Event of Default. "Usance Letter of Credit" means a Commercial Letter of Credit pursuant to which a time draft, payable by its terms not more than 90 days from the date thereof, is to be presented to the Issuing Bank for acceptance by such Issuing Bank. "White Holding" means White Holding B.V., a limited liability company organized and existing under the laws of The Netherlands. SECTION 2 --------- THE CREDIT ---------- 2.1 The Commitments. (a) From time to time, during the Availability --------------- Period, each Bank severally agrees to make Loans to each of the Obligors in U.S. Dollars in the aggregate principal amount for all Loans to all Obligors not to exceed the amount of such Bank's 11 Commitment; provided, however, that Loans shall not be made to White Holding -------- ------- after June 3, 2000. (b) Each Bank shall make available to the Obligors Reference Rate Loans and Eurodollar Loans up to the amount of such Bank's Commitment; provided, -------- however, that Loans shall not be made to White Holding after June 3, 2000. In - ------- no event shall the Total Utilization of Commitments at any time exceed the Total Commitment then in effect. 2.2 Loans made to the Borrower and the Designated Subsidiaries. Each ---------------------------------------------------------- Loan made to a Borrower or Designated Subsidiary shall be a Reference Rate Loan or a Eurodollar Loan and shall be in U.S. Dollars. Other than Loans made pursuant to Section 2.13(b) for the purpose of reimbursing any Issuing Bank for the amount of a drawing under a Letter of Credit issued by it, each Loan made to a Borrower or Designated Subsidiary shall be in the minimum amount of One Million Dollars ($1,000,000) with any additional amounts in integral multiples of One Hundred Thousand Dollars ($100,000). This is a revolving credit and the Obligors and the Designated Subsidiaries may, during the Availability Period, re-borrow amounts repaid or prepaid; provided, however, that the Banks shall not -------- ------- be obligated to make Loans to White Holding after June 3, 2000. No Loan nor any part of any Loan shall be prepaid except at the times and in the manner expressly provided herein. 2.3 Requests for Reference Rate and Eurodollar Loans. Each Reference ------------------------------------------------ Rate Loan and Eurodollar Loan shall be made upon irrevocable written or telephonic notice, confirmed promptly in writing, substantially in the form of Exhibit A hereto, by an Obligor to Administrative Agent received by Administrative Agent not later than 11:00 a.m. New York time not less than three (3) Eurodollar Banking Days prior to the Borrowing Date (which must be a Eurodollar Banking Day) of a Eurodollar Loan and not later than 11:00 a.m. New York time on the proposed Borrowing Date (which must be a Business Day) of a Reference Rate Loan. Upon receipt of a request for a Reference Rate Loan and Eurodollar Loan, Administrative Agent shall promptly notify the Banks of (i) the name of the entity (Borrower or a Designated Subsidiary) to which such Loan is to be made; (ii) the amount of such Loan, (iii) the Interest Period(s), if applicable, and (iv) the Borrowing Date requested. 2.4 Guaranty. The Loans and all other obligations of each Obligor -------- hereunder shall be irrevocably and unconditionally guaranteed, jointly and severally, by the Guarantors pursuant to the Guaranties. 2.5 Interest and Principal on Reference Rate Loans. The outstanding ---------------------------------------------- Principal Amount of each Reference Rate Loan shall bear interest until payment is due in full (computed daily on the basis of a three hundred sixty five or three hundred sixty six, as the case may be, day year and actual days elapsed) at the rate per annum equal to the Reference Rate. The Obligor to which such Loan was made shall pay on each Interest Payment Date all accrued and unpaid interest to such date on each Reference Rate Loan. Upon the occurrence and during the continuance of any Event of Default described in Section 9.1(a), such interest rate shall be increased by 2.0% per annum. The Obligor to which such Loan was made shall repay in full the Principal Amount of each Reference Rate Loan on the Termination Date or as provided in Section 2.8(c). 12 2.6 Interest and Principal on Eurodollar Loans. (a) The outstanding ------------------------------------------ Principal Amount of each Eurodollar Loan shall bear interest until payment is due in full (computed daily on the basis of a three hundred sixty (360) day year and actual days elapsed) at a rate per annum equal to the Eurodollar Rate plus the Applicable Margin. The Obligor to which such Loan was made shall pay interest on each Eurodollar Loan on each Interest Payment Date for such Eurodollar Loan. Upon the occurrence and during the continuance of any Event of Default described in Section 9.1(a), such interest rate shall be increased by 2.0% per annum. The Obligor to which such Loan was made shall repay in full the Principal Amount of each Eurodollar Loan on the last day of the Interest Period for such Eurodollar Loan or as provided in Section 2.8(c). (b) If any Reference Bank's Commitment (or, in the case of Citibank, CUSA's Commitment) shall terminate (otherwise than on termination of all the Commitments), or for any reason whatsoever the Reference Bank shall cease to be a Bank hereunder, that Reference Bank shall thereupon cease to be a Reference Bank, and the Eurodollar Rate shall be determined on the basis of the rates as notified by the remaining Reference Banks. Each Reference Bank shall use its best efforts to furnish quotations of rates to the Administrative Agent as contemplated hereby. If any of the Reference Banks shall be unable or otherwise fails to supply such rates to the Administrative Agent upon its request, the rate of interest shall be determined on the basis of the quotations of the remaining Reference Banks or Reference Bank. 2.7 Loan Accounts. Each Bank shall open and maintain on its books ------------- one or more loan accounts in the name of each Obligor; provided that the failure to open and maintain such loan accounts shall not affect the obligations of any Obligor hereunder. Each loan account shall show (without duplication) as debits thereto each Bank's portion of each Reference Rate Loan and/or Eurodollar Loan and as credits thereto all Reference Rate Loan and/or Eurodollar Loan payments received by such Bank for the account of such Bank and applied to principal so that the balance of the loan account(s) at all times reflects the principal amount due each Bank from each Obligor as Reference Rate Loans and Eurodollar Loans. All entries in said books shall be presumptive evidence of the making of each Reference Rate Loan and Eurodollar Loan, the obligation of each Obligor to repay each Reference Rate Loan and Eurodollar Loan, and all payments received and disbursed by such Bank. Each Obligor agrees that if, in the opinion of any Bank, a promissory note or other evidence of debt is required or appropriate to reflect or enforce any Loans outstanding to or to be made by such Bank, then such Obligor shall promptly execute and deliver to such Bank one or more promissory notes payable to such Bank to evidence the Loans outstanding to such Bank under this Agreement from time to time, together with such documents as such Bank may reasonably request to evidence the due authorization, execution, delivery and enforceability of such notes. If any notes are issued hereunder, Administrative Agent and the Obligors may treat the payee of that note as the owner of such note for all purposes. 2.8 Conversion of Loans Between Eurodollar Loans and Reference Rate --------------------------------------------------------------- Loans and Conversion of Interest Periods of Eurodollar Loans. (a) On any - ------------------------------------------------------------ Eurodollar Banking Day, the Obligor to which a Loan was made may convert on a pro rata basis among the Banks any outstanding Reference Rate Loans or Eurodollar Loans into any other type of Loan available to such Obligor hereunder, or the Obligor to which a Loan was made may change the Interest 13 Period of any Eurodollar Loan to another Interest Period available under this Agreement, subject to the following limitations: (i) No conversion of any Eurodollar Loan into any other Loan and no conversion of the Interest Period of any Eurodollar Loan may be made except on the last day of an Interest Period with respect thereto; and (ii) Any conversion shall be preceded by an irrevocable written or telephonic notice from the Obligor to which a Loan was made that it elects such conversion, which notice shall be received by Administrative Agent at least three (3) Eurodollar Banking Days prior to the date requested for such conversion from or into a Eurodollar Loan or conversion of the Interest Period of a Eurodollar Loan. (b) Banks shall not be obligated to make or continue any Eurodollar Loan when any Event of Default has occurred and is continuing, but such Loan shall be automatically converted to a Reference Rate Loan on the last day of the then current Interest Period, and, unless Section 2.9(f) is applicable, the Obligor to which such Loan was made shall be obligated to pay interest at the Reference Rate from the date any Loan is so converted until such Loan is repaid in full regardless of the date when Administrative Agent obtains knowledge of such Event of Default. Administrative Agent shall provide written notice of such conversion to such Obligor. (c) Each conversion of a Loan into a Reference Rate Loan or a Eurodollar Loan, as the case may be, shall be effected by each Bank, on behalf of the applicable Obligor, by making a simultaneous payment of the relevant Eurodollar Loan, or Reference Rate Loan, as the case may be, from the proceeds of the new Loans, procedures with respect thereto to be governed by the provisions of Section 2.3 hereof, except that disbursement shall be made by means of such payment rather than directly to such Obligor to the extent applicable with respect to each Bank. (d) If upon the expiration of any Interest Period applicable to Eurodollar Loans, the Obligor to which such Loan was made has failed to select a new Interest Period to be applicable thereto, or if any Event of Default or Unmatured Event of Default shall then exist, the Obligor to which such Loan was made shall be deemed to have elected to convert such Eurodollar Loans into Reference Rate Loans effective as of the expiration date of such current Interest Period. 2.9 Disbursements and Payments. (a) Each Reference Rate Loan and -------------------------- Eurodollar Loan shall be made on a pro rata basis by Banks, and each Bank's portion of each Loan shall be determined by application of its Percentage. Each Bank's interest in each Loan and each payment to such Bank under this Agreement shall be for the account of such Bank's applicable Lending Office. (b) Each Loan and each payment of principal, interest and other sums under this Agreement shall be made in immediately available funds (or such other funds as Administrative Agent may require) at Administrative Agent's Loan Syndications Operations Center at One Court Square, 7th Floor Zone 1, Long Island City, New York 11120, Acct No. 14 36852248, Ref: SurFin Ltd., Attn: Kim Coley or such other office designated by Administrative Agent from time to time. (c) Each Bank agrees it will make the funds which it is to advance hereunder available to Administrative Agent at its address set forth in Section 2.9(b) or such other office designated by Administrative Agent from time to time not later than 2:00 p.m. New York time on the Borrowing date, and except as provided in Section 2.13(b) with respect to Loans used to reimburse any Issuing Bank for the amount of a drawing under a Letter of Credit issued by it, Administrative Agent will thereupon promptly advance to the applicable Obligor the amount so received from Banks. (d) Payment of all sums under this Agreement shall be made by the Obligors to Administrative Agent, and the latter shall promptly distribute to each Bank its share of such payments. Each payment by the Obligors shall be made without set-off or counterclaim and not later than 11:00 a.m. New York time, in the case of Reference Rate Loans, and 2:00 p.m. New York time, in the case of Eurodollar Loans, in each case on the day such payment is due. All sums received after such time shall be deemed received on the next Business Day. (e) If Administrative Agent makes available to an Obligor an amount due from any Bank which such Bank fails to make available to Administrative Agent, or if Administrative Agent makes available to any Bank an amount due from an Obligor which such Obligor fails to make available to Administrative Agent, such Obligor or such Bank, as the case may be, shall, on demand, refund such amount to Administrative Agent, together with interest thereon for the period during which such amount was available to such Obligor or such Bank, as the case may be, at the Federal Funds Rate. (f) Any sum of interest payable by an Obligor hereunder if not paid when due shall bear interest (payable on demand) from its due date until payment in full (computed daily on the basis of a three hundred sixty-five or three hundred sixty-six, as the case may be, day year and actual days elapsed) at a rate per annum equal to the Reference Rate plus two (2) percentage points. 2.10 Facility Fee. Borrower shall pay Administrative Agent for the ------------ account of the Banks, a facility fee (the "Facility Fee") on the Total Commitment (without regard to the amount of Loans outstanding or Letter of Credit Usage at any time hereunder) during the Availability Period at the rate of (a) with respect to each day that Level 1 is applicable, 0.125% per annum, (b) with respect to each day that Level 2 is applicable, 0.150% per annum, (c) with respect to each day that Level 3 is applicable, 0.175% per annum, and (d) with respect to each day that Level 4 is applicable, 0.250% per annum; provided, -------- however, following any reduction in the Total Commitment pursuant to Section 3.5 - ------- or 3.6 hereof the computation of the Facility Fee shall be based upon such reduced Total Commitment as of the effective date of such reduction. The Facility Fee shall be computed on a calendar quarter basis. The Facility Fee shall be calculated on the basis of a three hundred sixty day year and actual days elapsed, which results in a higher fee than if a 365/366-day year were used, and shall be payable on the last day of each March, June, September and December (for the Facility Fee accrued and unpaid to such date), on the Termination Date and on the date of the cancellation of any portion of the Commitments in accordance with Section 3.10. The applicable Level shall be determined by the Administrative 15 Agent on the basis of timely information furnished to it by Borrower, Hughes, Moody's or S&P with respect to the rating on Long-term Debt; any change in the Facility Fee shall be effective on the earlier of the date on which such rating change is publicly announced or on the date written confirmation of a change in the rating on Long-term Debt is sent to Borrower or Hughes by Moody's or S&P. 2.11 Issuance of Letters of Credit and Banks' Purchase of ---------------------------------------------------- Participations in Participated Letters of Credit. - ------------------------------------------------ (a) Letters of Credit. In addition to each Obligor's ability to ----------------- request that Banks make Loans pursuant to subsection 2.1(a), each Obligor may request, in accordance with the provisions of this subsection 2.11, from time to time during the period from the Effective Date until the date which is 30 days prior to the Termination Date, that one or more Issuing Banks issue Letters of Credit for the account of such Obligor for the purposes specified in the definitions of Commercial Letters of Credit and Standby Letters of Credit. Each Obligor may, in its sole discretion, determine whether or not each Letter of Credit so requested will be subject to participation by all the Banks pursuant to subsection 2.11(c) (each Letter of Credit subject to participation being a "Participated Letter of Credit" and collectively, the "Participated Letters of Credit", and such Letter of Credit not subject to participation by all the Banks pursuant to subsection 2.11(d) being a "Non-Participated Letter of Credit" and collectively the "Non-Participated Letters of Credit"). Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Obligors herein set forth, any one or more Banks may, but shall not be obligated to, issue such Letters of Credit in accordance with the provisions of this subsection 2.11 and in accordance with such Bank's standard form of application for issuance of letters of credit; provided that no Obligor -------- shall request that any Issuing Bank issue (and no Issuing Bank shall issue): (i) any Letter of Credit if, after giving effect to such issuance, the Total Utilization of Commitments would exceed the Total Commitment then in effect; (ii) any Standby Letter of Credit having an expiration date later than the earlier of (1) the date which is 30 days prior to the Termination Date and (2) the date which is one year from the date of issuance of such Standby Letter of Credit; provided that the immediately preceding clause (2) shall not -------- prevent any Issuing Bank from agreeing that a Standby Letter of Credit will automatically be extended for one or more successive periods not to exceed one year each (it being understood that such Standby Letter of Credit shall not be automatically extended to a date later than 30 days prior to the Termination Date) unless such Issuing Bank elects not to extend for any such additional period; and provided, further that such Issuing Bank shall elect not to extend -------- ------- such Standby Letter of Credit if it has received written notice from Administrative Agent that an Event of Default has occurred and is continuing (and has not been waived in accordance with subsection 11.3) at the time such Issuing Bank must elect whether or not to allow such extension; (iii) any Commercial Letter of Credit (other than a Usance Letter of Credit) having an expiration date (1) later than the earlier of (x) the date which is 30 days prior to the Termination Date and (y) the date which is 180 days from the date of issuance of such 16 Commercial Letter of Credit or (2) that is otherwise unacceptable to the applicable Issuing Bank in its reasonable discretion; (iv) any Usance Letter of Credit (1) having an expiration date later than (x) the date which is 100 days prior to the Termination Date, or (y) 180 days from the date of issuance of such Usance Letter of Credit or (2) that is otherwise unacceptable to the applicable Issuing Bank in its reasonable discretion; (v) any Letter of Credit denominated in a currency other than Dollars; or (vi) any Letter of Credit not governed by the Uniform Customs and Practice for Documentary Credits (1993 Revision) International Chamber of Commerce Brochure No. 500, and any subsequent revisions thereto as agreed between the Obligor for whose account such Letter of Credit is issued and the applicable Issuing Bank. In case of any conflict between (i) an Issuing Bank's standard form of application for issuance of letters of credit and (ii) the terms of this Agreement, the terms of this Agreement shall govern. Notwithstanding anything to the contrary contained in an Issuing Bank's standard form of application for issuance of letters of credit, no lien shall be granted to such Issuing Bank on any property of Borrower or its Subsidiaries to secure the obligation of an Obligor with respect to a Letter of Credit, except as otherwise provided in Section 9.4. (b) Mechanics of Issuance. (i) Notice of Issuance. Whenever an Obligor desires the issuance of ------------------ a Letter of Credit, it shall deliver, in case of a Participated Letter of Credit, to Administrative Agent, or in case of a Non-Participated Letter of Credit, to the Issuing Bank (with a copy to Administrative Agent), an L/C Request substantially in the form of Exhibit K hereto, accompanied by an --------- executed application for issuance of such Letter of Credit in the standard form then utilized by the Issuing Bank, no later than 11:00 A.M. (New York City time) at least two Business Days or such shorter period as may be agreed to by the Issuing Bank in any particular instance, in advance of the proposed date of issuance. The L/C Request shall specify (a) the proposed date of issuance (which shall be a Business Day), (b) whether the Letter of Credit is to be a Standby Letter of Credit or a Commercial Letter of Credit (and, if a Commercial Letter of Credit, whether such Commercial Letter of Credit is to be a Usance Letter of Credit), (c) the face amount of the Letter of Credit, which shall be a minimum of One Million Dollars ($1,000,000) in case of a Participated Letter of Credit which is a Commercial Letter of Credit, (d) the expiration date of the Letter of Credit, (e) whether the Letter of Credit is to be a Participated Letter of Credit or a Non-Participated Letter of Credit, (f) either the verbatim text of the proposed Letter of Credit or the proposed terms and conditions thereof, including a precise description of any documents to be presented by the beneficiary which, if presented by the beneficiary prior to the expiration date of the Letter of Credit, would require the Issuing Bank to make payment (including pursuant to an Accepted Time Draft) under the Letter of Credit and (g) the purpose of the proposed Letter of Credit; provided that the Issuing -------- Bank, in its reasonable discretion, may require, subject to the consent by the Obligor that requested such Letter of Credit, changes in the text of the proposed Letter of Credit or any such documents, and the date of issuance of such Letter of Credit shall be extended until such changes have been agreed to by such Obligor (it being understood that the 17 Issuing Bank shall not be obligated to issue any Letter of Credit if such changes are not agreed to by such Obligor); and provided, further that no Letter -------- ------- of Credit shall require payment against (or, in the case of a Usance Letter of Credit, acceptance of) a conforming draft on the same business day (under the laws of the jurisdiction in which the office of the Issuing Bank to which such draft is required to be presented is located) that such draft is presented. The Obligor requesting any Letter of Credit shall notify the applicable Issuing Bank (and Administrative Agent, if Citibank is not such Issuing Bank) prior to the issuance of such Letter of Credit in the event that any of the matters to which such Obligor is required to certify in the applicable L/C Request is no longer true and correct as of the proposed date of issuance of such Letter of Credit, and upon the issuance of any Letter of Credit such Obligor shall be deemed to have re-certified, as of the date of such issuance, as to the matters to which such Obligor is required to certify in the applicable L/C Request. (ii) Determination of Issuing Bank. ----------------------------- (A) Upon receipt by Administrative Agent of an L/C Request pursuant to subsection 2.11(b)(i) requesting the issuance of a Participated Letter of Credit, in the event Citibank elects to issue such Participated Letter of Credit, Administrative Agent shall promptly so notify the Obligor requesting such Letter of Credit, and Citibank shall be the Issuing Bank with respect thereto. In the event that Citibank in its sole discretion, elects not to issue such Participated Letter of Credit, Administrative Agent shall promptly so notify the Obligor requesting such Letter of Credit, whereupon such Obligor may request any other Bank to issue such Participated Letter of Credit by delivering to such Bank a copy of the applicable L/C Request. Any Bank so requested to issue such Participated Letter of Credit shall promptly notify such Obligor and Administrative Agent whether or not, in its sole discretion, it has elected to issue such Participated Letter of Credit, and any such Bank which so elects to issue such Participated Letter of Credit shall be the Issuing Bank with respect thereto. (B) In the event an Obligor desires to request the issuance of a Non- Participated Letter of Credit, it shall, prior to its delivery of an L/C Request pursuant to subsection 2.11(b)(i), request any Bank to issue such Non-Participated Letter of Credit for such fees or other compensation as may be agreed upon solely between such Obligor and such Bank. Any Bank may, but shall not be obligated to, issue such Non-Participated Letters of Credit in accordance with the provisions of this subsection 2.11. Any such Bank which so elects to issue such Non-Participated Letter of Credit shall be the Issuing Bank with respect thereto, and such Obligor shall provide an L/C Request with respect to such Non-Participated Letter of Credit in accordance with the provisions of subsection 2.11(b)(i), which L/C Request shall specify that the Letter of Credit requested shall be a Non- Participated Letter of Credit. (iii) Issuance of Letter of Credit. Upon satisfaction or waiver (in ---------------------------- accordance with subsection 11.3) of the conditions set forth in Section 5.3, the Issuing Bank shall issue the requested Letter of Credit in accordance with the Issuing Bank's standard operating procedures. 18 (iv) Notification to Administrative Agent. Upon the issuance of any ------------------------------------ Letter of Credit the applicable Issuing Bank shall promptly notify Administrative Agent of such issuance, which notice shall specify whether such Letter of Credit is a Participated Letter of Credit or a Non-Participated Letter of Credit and shall be accompanied by a copy of such Letter of Credit. Upon (x) each payment under a Letter of Credit, (y) each acceptance of a draft under a Usance Letter of Credit, and (z) any amendment of a Letter of Credit changing the amount or expiry date thereof, the Issuing Bank of such Letter of Credit shall promptly notify Administrative Agent of such event. (v) Monthly Report. Within 15 days after the end of each month, so -------------- long as any Letter of Credit or Accepted Time Draft shall have been outstanding during such month, the Administrative Agent shall deliver to each Bank a report setting forth for such month the daily aggregate amount available to be drawn under Standby Letters of Credit and Commercial Letters of Credit, the daily aggregate amount of outstanding Accepted Time Drafts, and the amount such Bank's participation interest, if any, in each of the foregoing aggregate amounts. (c) Banks' Purchase of Participations in Participated Letters of ------------------------------------------------------------ Credit and Accepted Time Drafts. Immediately upon the issuance of each - ------------------------------- Participated Letter of Credit, each Bank shall be deemed to, and hereby agrees to, have irrevocably purchased from the Issuing Bank a participation in such Participated Letter of Credit and any drawings honored thereunder and any Accepted Time Drafts created thereunder in an amount equal to such Bank's share based on its Percentage of the maximum amount which is or at any time may become available to be drawn (including by way of presentation of time drafts) thereunder. (d) Non-Participated Letters of Credit and Accepted Time Drafts. No ----------------------------------------------------------- Bank shall be deemed to have purchased from any Issuing Bank a participation in any Non-Participated Letter of Credit issued by such Issuing Bank and any drawings honored thereunder and any Accepted Time Drafts created thereunder. 2.12 Letter of Credit Fees. --------------------- (a) Each Obligor agrees to pay the following amounts with respect to Participated Letters of Credit issued for its account hereunder: (i) with respect to each Standby Letter of Credit which is a Participated Letter of Credit, (1) a fronting fee, payable directly to the applicable Issuing Bank for its own account, as may be agreed between such Obligor and the applicable Issuing Bank in a separate fee letter, it being understood that all payment obligations of such Obligor to any Issuing Bank pursuant to such fee letter shall be deemed to be obligations of such Obligor under this Agreement, and (2) a letter of credit fee, payable to Administrative Agent for the account of Banks, equal to the Applicable Margin per annum of the daily amount available to be drawn under such Standby Letter of Credit, each such fronting fee or letter of credit fee to be payable in arrears on and to the last day of March, June, September and December of each year and on the Termination Date, and computed on the basis of a 360-day year for the actual number of days elapsed; (ii) with respect to each Commercial Letter of Credit which is a Participated Letter of Credit, such fees (which may include issuance, amendment, payment and acceptance 19 fees), payable directly to the applicable Issuing Bank for its own account, as may be agreed between such Obligor and the applicable Issuing Bank in a separate fee letter, it being understood that all payment obligations of such Obligor to any Issuing Bank pursuant to such fee letter shall be deemed to be obligations of such Obligor under this Agreement; (iii) with respect to each Accepted Time Draft created under a Participated Letter of Credit, an Accepted Time Draft fee, payable to Administrative Agent for the account of Banks, equal to 0.75% per annum of the daily outstanding amount of such Accepted Time Draft, payable in arrears on and to the last day of March, June, September and December of each year and on the Termination Date, and computed on the basis of a 360-day year for the actual number of days elapsed; and (iv) with respect to each Participated Letter of Credit and each payment of a drawing made thereunder (without duplication of the fees payable under clauses (i) and (ii) above), documentary and processing charges (unless the applicable Participated Letter of Credit requires the beneficiary thereof to pay such documentary and processing charges) payable directly to the applicable Issuing Bank for its own account in accordance with such Issuing Bank's standard schedule for such charges as disclosed to such Obligor on or prior to the issuance of such Participated Letter of Credit. For purposes of calculating any fees payable under clauses (i) and (ii) of this subsection 2.12(a), the daily amount available to be drawn under any Letter of Credit shall be determined as of the close of business on any date of determination. Promptly upon receipt by Administrative Agent of any amount described in clause (i)(2) or (iii) of this subsection 2.12(a), Administrative Agent shall distribute to each Bank such Bank's share of such amount based on such Bank's Percentage. (b) Each Obligor for whose account a Letter of Credit is issued hereunder agrees to pay such issuance fee, letter of credit fee, Accepted Time Draft fee, or such other fees (which may include issuance, drawing, amendment, payment and acceptance fees) and charges (which may include documentary and processing charges (unless the applicable Non-Participated Letter of Credit requires the beneficiary thereof to pay such documentary and processing charges)) with respect to Non-Participated Letters of Credit issued hereunder, payable directly to the applicable Issuing Bank for its own account, as may be agreed between such Obligor and the applicable Issuing Bank in a separate fee letter, it being understood that all payment obligations of such Obligor to any Issuing Bank pursuant to such fee letter shall be deemed to be obligations of such Obligor under this Agreement, each such issuance fee, letter of credit fee or Accepted Time Draft fee to be payable in arrears on and to the last day of March, June, September and December of each year and on the Termination Date or such other times as may be agreed between such Obligor and the applicable Issuing Bank. 2.13 Drawings and Reimbursement of Amounts Paid Under Letters of ----------------------------------------------------------- Credit. - ------ (a) Responsibility of Issuing Bank With Respect to Drawings. In ------------------------------------------------------- determining whether to honor any drawing under any Letter of Credit by the beneficiary thereof, the Issuing Bank shall be responsible only to examine the documents delivered under such Letter of Credit 20 with reasonable care so as to ascertain whether they appear on their face to be in accordance with the terms and conditions of such Letter of Credit. (b) Reimbursement by Obligors of Amounts Paid Under Letters of ---------------------------------------------------------- Credit. In the event an Issuing Bank has determined to honor a drawing under a - ------ Letter of Credit issued by it (including by way of accepting an Accepted Time Draft under a Usance Letter of Credit), such Issuing Bank shall immediately notify Administrative Agent and the Obligor for whose account such Letter of Credit was issued, and such Obligor shall reimburse such Issuing Bank on or before the Business Day on which such drawing is honored by payment (or, if the drawing is honored by accepting an Accepted Time Draft, on or before the Business Day on which such Accepted Time Draft is payable) (any such date being the "Reimbursement Date") in an amount in dollars and in same day funds equal to the amount of such honored drawing or Accepted Time Draft, as the case may be; provided that anything contained in this Agreement to the contrary - -------- notwithstanding, (i) unless such Obligor shall have notified Administrative Agent and such Issuing Bank prior to 10:00 A.M. (New York City time) on the date such drawing is honored by payment or Accepted Time Draft is payable that such Obligor intends to reimburse such Issuing Bank for the amount of such honored drawing or Accepted Time Draft, as the case may be, with funds other than the proceeds of Loans (it being understood that White Holding must reimburse such Issuing Bank with funds other than proceeds of Loans after June 3, 2000), such Obligor shall be deemed to have given a timely Loan Request to Administrative Agent requesting Banks to make Loans that are Reference Rate Loans on the Reimbursement Date in an amount in dollars equal to the amount of such honored drawing or Accepted Time Draft, as the case may be, and (ii) subject to satisfaction or waiver of the conditions specified in Section 5.2, Banks shall, on the Reimbursement Date, make Loans that are Reference Rate Loans in the amount of such honored drawing or Accepted Time Draft, as the case may be, the proceeds of which shall be applied directly by Administrative Agent to reimburse such Issuing Bank for the amount of such honored drawing or Accepted Time Draft, as the case may be; and provided, further that if for any reason proceeds of -------- ------- Loans are not received by such Issuing Bank on the Reimbursement Date in an amount equal to the amount of such honored drawing or Accepted Time Draft, as the case may be, such Obligor shall reimburse such Issuing Bank, on demand, in an amount in same day funds equal to the excess of the amount of such honored drawing or Accepted Time Draft, as the case may be, over the aggregate amount of such Loans, if any, which are so received. Nothing in this Section 2.13(b) shall be deemed to relieve any Bank from its obligation to make Loans on the terms and conditions set forth in this Agreement, and each Obligor shall retain any and all rights it may have against any Bank resulting from the failure of such Bank to make such Loans under this Section 2.13(b). (c) Payment by Banks of Unreimbursed Amounts Paid Under Participated ---------------------------------------------------------------- Letters of Credit. - ----------------- (i) Payment by Banks in case of Participated Letters of Credit. In ---------------------------------------------------------- the event that any Obligor shall fail for any reason to reimburse any Issuing Bank as provided in Section 2.13(b) in an amount equal to the amount of any drawing honored by such Issuing Bank under a Participated Letter of Credit issued by it or the amount of an Accepted Time Draft accepted by it, such Issuing Bank shall promptly notify each other Bank of the unreimbursed amount of such honored drawing or Accepted Time Draft, as the case may be, and of such other Bank's respective participation therein based on such other Bank's Percentage. Each Bank shall make 21 available to such Issuing Bank an amount equal to its respective participation, in dollars and in same day funds, at the office of such Issuing Bank specified in such notice, not later than 2:00 P.M. (New York City time) on the first business day (under the laws of the jurisdiction in which such office of such Issuing Bank is located) after the date notified by such Issuing Bank. In the event that any Bank fails to make available to such Issuing Bank on such business day the amount of such Bank's participation in such Participated Letter of Credit or Accepted Time Draft, as the case may be, as provided in this Section 2.13(c), such Issuing Bank shall be entitled to recover such amount on demand from such Bank together with interest thereon at the rate customarily used by such Issuing Bank for the correction of errors among banks for three Business Days and thereafter at the Reference Rate. Nothing in this Section 2.13(c) shall be deemed to prejudice the right of any Bank to recover from any Issuing Bank any amounts made available by such Bank to such Issuing Bank pursuant to this Section 2.13(c), plus interest thereon at the Reference Rate, in the event that it is determined by the final judgment of a court of competent jurisdiction that the payment or acceptance of an Accepted Time Draft with respect to a Participated Letter of Credit by such Issuing Bank in respect of which payment or acceptance of an Accepted Time Draft was made by such Bank constituted gross negligence or willful misconduct on the part of such Issuing Bank. (ii) Distribution to Banks of Reimbursements Received From Obligors -------------------------------------------------------------- with respect to Participated Letters of Credit. In the event any Issuing Bank - ---------------------------------------------- shall have been reimbursed by other Banks pursuant to Section 2.13(c)(i) for all or any portion of any drawing honored or Accepted Time Draft accepted by such Issuing Bank under a Participated Letter of Credit issued by it, such Issuing Bank shall distribute to each other Bank which has paid all amounts payable by it under Section 2.13(c)(i) with respect to such honored drawing or Accepted Time Draft such other Bank's share based on such other Bank's Percentage of all payments subsequently received by such Issuing Bank from an Obligor in reimbursement of such honored drawing or Accepted Time Draft when such payments are received. Any such distribution shall be made to a Bank at its primary address set forth in Exhibit C or at such other address as such Bank may request. (d) Interest on Amounts Paid Under Letters of Credit. ------------------------------------------------ (i) Payment of Interest by Obligors. Each Obligor agrees to pay to ------------------------------- each Issuing Bank, with respect to drawings honored under any Letters of Credit issued by such Issuing Bank for such Obligor's account, interest on the amount paid by such Issuing Bank in respect of each such honored drawing from the date such drawing is honored (or in the case of drawings honored by accepting an Accepted Time Draft, the date such Accepted Time Draft is paid) to but excluding the date such amount is reimbursed by an Obligor (including any such reimbursement out of the proceeds of Loans pursuant to Section 2.13(b), if applicable) at a rate equal to (1) for the period from the date such drawing is honored to but excluding the date that is two Business Days following the date such drawing is honored, the rate then in effect under this Agreement with respect to Loans that are Reference Rate Loans and (2) thereafter, a rate which is 2% per annum in excess of the rate of interest otherwise payable under this Agreement with respect to Loans that are Reference Rate Loans. Interest payable pursuant to this subsection 2.13(d)(i) shall be computed on the basis of a 360- day year for the actual number of days elapsed in the period during which it accrues and shall be payable on demand or, if no demand is made, on the date on which the related drawing under a Letter of Credit is reimbursed in full. 22 (ii) Distribution of Interest Payments by Issuing Bank with respect -------------------------------------------------------------- to Participated Letters of Credit. Promptly upon receipt by any Issuing Bank of - --------------------------------- any payment of interest pursuant to subsection 2.13(d)(i) with respect to a drawing honored under a Participated Letter of Credit issued by it, (1) such Issuing Bank shall distribute to each other Bank, out of the interest received by such Issuing Bank in respect of the period from the date such drawing is honored (or in the case of drawings honored by accepting an Accepted Time Draft, the date such Accepted Time Draft is paid) to but excluding the date on which such Issuing Bank is reimbursed for the amount of such drawing (including any such reimbursement out of the proceeds of Loans pursuant to subsection 2.13(b)), the amount that such other Bank would have been entitled to receive in respect of the letter of credit fee that would have been payable in respect of such Participated Letter of Credit for such period pursuant to Section 2.12 if no drawing had been honored under such Participated Letter of Credit, and (2) in the event such Issuing Bank shall have been reimbursed by other Banks pursuant to subsection 2.13(c)(i) for all or any portion of such honored drawing, such Issuing Bank shall distribute to each other Bank which has paid all amounts payable by it under subsection 2.13(c)(i) with respect to such honored drawing such other Bank's share of any interest based on such other Bank's Percentage received by such Issuing Bank in respect of that portion of such honored drawing so reimbursed by other Banks for the period from the date on which such Issuing Bank was so reimbursed by other Banks to but excluding the date on which such portion of such honored drawing is reimbursed by the Obligors. Any such distribution shall be made to a Bank at its primary address set forth in Exhibit C or at such other address as such Bank may request. (e) White Holding hereby acknowledges and agrees that it shall not request or receive Letters of Credit issued for its account pursuant to this Agreement until such time as (a) White Holding certifies, in form and substance satisfactory to Administrative Agent, that it has either obtained or does not require an authorization from the Netherlands government with respect to its execution, delivery and performance of the Credit Agreement and that all representations and warranties as to White Holding set forth in Section 6 of this Agreement are true and correct; (b) Netherlands counsel for White Holding delivers to the Administrative Agent and the Banks an opinion covering the matters set forth in Exhibit F-2 hereto; (c) New York counsel for White Holding delivers an opinion covering the matters set forth in Exhibit G hereto; and (d) all corporate and other proceedings taken or to be taken in connection with the execution, delivery and performance by White Holding of the Credit Agreement and all documents incidental thereto are satisfactory in form and substance to Administrative Agent, acting on behalf of the Banks, and its counsel. At such time, Administrative Agent will notify Borrower, Dish Placement and White Holding that White Holding may thereafter request and receive Letters of Credit issued for its account pursuant to the Credit Agreement. 2.14 Obligations Absolute. -------------------- The obligation of each Obligor to reimburse each Issuing Bank for drawings honored under the Letters of Credit issued by such Issuing Bank for such Obligor's account and to repay any Loans made by Banks pursuant to Section 2.13(b) and the obligations of Banks under subsection 2.13(c)(i) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement and such Issuing Bank's standard form of application for issuance of letters of credit under all circumstances including, without limitation, any of the following circumstances: 23 (i) any lack of validity or enforceability of this Agreement, any Letter of Credit or any other agreement, application, amendment, guaranty, document or instrument relating thereto; (ii) the existence of any claim, set-off, defense or other right which any Obligor or any Bank may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), any Issuing Bank or other Bank or any other Person or, in the case of a Bank, against any Obligor, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Obligor or one of its Subsidiaries and the beneficiary for which any Letter of Credit was procured); (iii) any draft or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment of a drawing or acceptance of an Accepted Time Draft by the applicable Issuing Bank under any Letter of Credit against presentation of a draft or other document which does not substantially comply with the terms of such Letter of Credit, unless (A) the applicable Issuing Bank and Administrative Agent receive from the Obligor for whose account such Letter of Credit was issued notice in writing of such noncompliance within three Business Days after such Obligor shall have received such draft or such other document, and (B) such Obligor takes all reasonable steps to mitigate any loss; (v) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of any Obligor or any of its Subsidiaries; (vi) any breach of this Agreement or any other Loan Document by any party thereto; (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; or (viii) the fact that an Event of Default or a Unmatured Event of Default shall have occurred and be continuing; provided, in each case, that payment or acceptance of an Accepted Time -------- Draft or other draft under a Letter of Credit by the applicable Issuing Bank under the applicable Letter of Credit shall not have constituted gross negligence or willful misconduct of such Issuing Bank under the circumstances in question. 2.15 Indemnification; Nature of Issuing Banks' Duties. ------------------------------------------------ (a) Indemnification. In addition to amounts payable as provided in --------------- Section 2.16, each Obligor hereby agrees to protect, indemnify, pay and save harmless each Issuing Bank from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which such Issuing Bank may incur or be subject to as a consequence, direct 24 or indirect, of (i) the issuance of any Letter of Credit by such Issuing Bank for the account of such Obligor, other than as a result of (1) the gross negligence or willful misconduct of such Issuing Bank or (2) subject to the following clause (ii), the wrongful dishonor by such Issuing Bank of a proper demand for payment made under any Letter of Credit issued by it, (ii) the failure of such Issuing Bank to honor a drawing under any such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions herein called "Governmental Acts") or (iii) the enforcement of this Agreement. (b) Nature of Issuing Banks' Duties. As between each Obligor and any ------------------------------- Issuing Bank, such Obligor assumes all risks of the acts and omissions of, the solvency of, or misuse of the Letters of Credit issued by such Issuing Bank by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit, it being understood that such Obligor shall not be required to reimburse or otherwise indemnify the Issuing Bank in respect of any payments or acceptance of an Accepted Time Drafts by such Issuing Bank under the applicable Letter of Credit constituting gross negligence or willful misconduct of such Issuing Bank under the circumstances in question; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms or in translation; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; (viii) any consequences arising from causes beyond the control of such Issuing Bank, including without limitation any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of such Issuing Bank's rights or powers hereunder; (ix) the effectiveness or suitability of any Letter of Credit for such Obligor's purpose, or be regarded as the drafter of such Letter of Credit regardless of any assistance that the Issuing Bank may, in its discretion, provide to such Obligor in preparing the text of the Letter of Credit or amendments thereto; or (x) any consequential or special damages, or for any damages resulting from any change in the value of any goods or other property covered by any Letter of Credit. An Issuing Bank may, without being placed under any resulting liability, (i) rely upon any oral, telephonic, telegraphic, facsimile, electronic, written or other communication believed in Good Faith to have been authorized (in writing) by an Obligor, whether or not given or signed by an authorized person; (ii) disregard (A) any requirement stated in a Letter of Credit that any draft, certificate or other document be presented to it at a particular hour or place and (B) any discrepancies that do not reduce the value of the beneficiary's performance to any Obligor in any transaction underlying a Letter of Credit; (iii) accept as a draft any written 25 demand for payment under a Letter of Credit, regardless of the legal sufficiency of such demand as a draft; (iv) honor a previously dishonored presentation under a Letter of Credit, whether pursuant to court order, to settle or compromise any claim that it wrongfully dishonored, or otherwise, and shall be entitled to reimbursement to the same extent as if it had initially honored plus reimbursement of any interest paid by it; or (v) may pay any paying or negotiating bank (designated or permitted by the terms of a Letter of Credit) claiming that it rightfully honored under the laws or practices of the place where it is located. In furtherance and extension and not in limitation of the specific provisions set forth in the first two paragraphs of this Section 2.15(b), any action taken or omitted by any Issuing Bank under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in Good Faith, shall not put such Issuing Bank under any resulting liability to the Obligors. Notwithstanding anything to the contrary contained in this Section 2.15, each Obligor shall retain any and all rights it may have against any Issuing Bank for any liability arising out of the gross negligence or willful misconduct of such Issuing Bank. 2.16 Increased Costs and Taxes Relating to Letters of Credit. ------------------------------------------------------- Subject to the provisions of Section 3.2 (which shall be controlling with respect to the matters covered thereby), in the event that any Issuing Bank or Bank shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by any Issuing Bank or Bank with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Issuing Bank or Bank (or its applicable lending or letter of credit office) to any additional Tax (other than any Tax on the overall net income of such Issuing Bank or Bank) with respect to the issuing or maintaining of any Letters of Credit, accepting an Accepted Time Draft or the purchasing or maintaining of any participations therein or any other obligations under this Section 2 with respect to Letters of Credit or Accepted Time Drafts, whether directly or by such being imposed on or suffered by any particular Issuing Bank; (ii) imposes, modifies or holds applicable any reserve (including without limitation any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement in respect of any Letters of Credit issued by any Issuing Bank or Accepted Time Drafts or participations therein purchased by any Bank; or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Issuing Bank or Bank (or its applicable lending or letter of credit office) regarding 26 this Section 2 with respect to Letters of Credit or any Letter of Credit or Accepted Time Drafts or any participation therein; and the result of any of the foregoing is to increase the cost to such Issuing Bank or Bank of agreeing to issue, issuing or maintaining any Letter of Credit or Accepted Time Drafts or agreeing to purchase, purchasing or maintaining any participation therein or to reduce any amount received or receivable by such Issuing Bank or Bank (or its applicable lending or letter of credit office) with respect thereto; then, in any case, the Obligor for whose account such Letter of Credit was issued shall promptly pay to such Issuing Bank or Bank, upon receipt of the statement referred to in the next sentence, such additional amount or amounts as may be necessary to compensate such Issuing Bank or Bank for any such increased cost or reduction in amounts received or receivable hereunder. Such Issuing Bank or Bank shall deliver to Borrower a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Issuing Bank or Bank under this Section 2.16, which statement shall be conclusive and binding upon all parties hereto absent manifest error. 2.17 Survival of Certain Provisions Relating to Letters of Credit. ------------------------------------------------------------ Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of the Obligors set forth in Sections 2.15 and 2.16 shall survive the termination of this Agreement. SECTION 3 --------- PAYMENT OF COSTS AND REDUCTION ------------------------------ OF THE COMMITMENT ----------------- 3.1 Indemnification Upon Failure to Pay Eurodollar Loan. If an --------------------------------------------------- Obligor makes any payment of principal with respect to any Eurodollar Loan on a day other than the last day of the then current Interest Period applicable to such Loan (including without limitation any payment upon reduction of the Commitments) or fails to borrow, prepay, continue or convert its Eurodollar Loan on a date designated to Administrative Agent in a notice pursuant to this Agreement (if such failure does not result from the application of Sections 4.1 or 4.2), such Obligor shall reimburse each Bank within fifteen (15) days after receipt of written demand for any loss incurred by it as a result of the timing of such payment or non-borrowing not reflected in the Eurodollar Rate, including without limitation any loss incurred in liquidating or employing deposits from third parties (but not loss of profit) for the period after such payment or non- borrowing. A certificate of such Bank setting forth the amounts reasonably necessary so to reimburse it in respect of any loss shall be conclusive and binding absent manifest error. 3.2 Increased Costs. (a) If after the date hereof, any applicable --------------- law, rule or regulation or any change therein or in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof or compliance by any Bank (or its Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency, whether or not having the force of law, shall impose, modify or deem applicable: 27 (i) any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit, compulsory loan or similar requirements against assets, commitments or deposits or other liabilities with, of or for the account of, or credit extended by, or any acquisition of funds by or for the account of any Bank or its Lending Office or the offshore interbank market or any other condition affecting its obligations to make, maintain or fund the Loans to the Obligors hereunder; (ii) any capital or similar requirements against (or against any class of or change in or the amount of) assets or liabilities of, or commitments, Letters of Credit, or Accepted Time Drafts, participations therein or extensions of credit by, such Bank; each Bank which is so affected shall give prompt notice to Borrower describing such reserves or requirements at least four (4) Business Days prior to the date such Bank will begin to implement such additional charges with respect to the Obligors. If the result of any of the foregoing is to increase the cost or reduce the profit to such Bank (or its Lending Office or any corporation controlling a Bank) under this Agreement by an amount deemed by such Bank to be material, then, within fifteen (15) days after written demand by such Bank, the Obligors will pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost incurred or reduction in profit suffered by such Bank. Such Bank agrees to use reasonable efforts (consistent with legal and regulatory restrictions) to designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not be otherwise disadvantageous to such Bank in the sole discretion of such Bank. A certificate of such Bank setting forth the basis for determining such additional amount or amounts necessary to compensate the Bank shall be conclusive in the absence of manifest error. (b) Without limiting the effect of the foregoing (but without duplication), upon any Bank's prior written request, the Obligors shall pay to such Bank on the last day of each Interest Period, so long as such Bank may be required to maintain reserves against "eurocurrency liabilities" under Regulation D (as at any time amended) of the Board of Governors of the Federal Reserve System, as additional interest on the unpaid principal amount of each Eurodollar Loan by such Bank outstanding during such Interest Period, an additional amount (determined by such Bank and notified to Borrower in writing) up to but not exceeding such amount as would, together with payments of interest on such Eurodollar Loan for such Interest Period, result in the receipt by such Bank of total interest on such Eurodollar Loan, for such Interest Period at a rate determined by such Bank to be equal to the sum of: (i) the Eurodollar Rate divided by (a) 1 minus (b) the rate (expressed as a decimal) of such reserves required by Regulation D, plus (ii) the Applicable Margin. In determining the additional amount payable for an Interest Period pursuant to this Section, such Bank shall take into account any transitional adjustment or phase-in provisions of such reserve requirements applicable during such Interest Period, which would reduce the reserve requirement otherwise applicable to eurocurrency liabilities during such Interest Period; provided, -------- however, each Bank in its sole discretion may determine the allocation of - ------- reserve requirements to its Eurodollar Loans. Each such determination made by such Bank, and each such notification by such Bank to Borrower under this Section, shall be conclusive as to the matters set forth therein in the absence of manifest error. 28 3.3 Taxes. All payments or reimbursements under this Agreement and ----- any instrument or agreement required hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any and all present and future Taxes. Each Obligor agrees to cause all such Taxes to be paid on behalf of any Bank or Administrative Agent directly to the appropriate governmental authority. If an Obligor is legally prohibited from complying with this subsection, payments due to such Bank or Administrative Agent under this Agreement and any instrument or agreement required hereunder shall be increased so that, after provisions for Taxes and all Taxes on such increase, the amounts received by such Bank or Administrative Agent will be equal to the amounts required under this Agreement and any instrument or agreement required hereunder as if no Taxes were due on such payments. Each Obligor shall indemnify each Bank and Administrative Agent for the full amount of Taxes payable by such Bank or Administrative Agent and any liabilities (including penalties, interest and expenses) arising from such Taxes within thirty (30) days from any written demand by such Bank. Each Obligor shall provide evidence that all applicable Taxes have been paid to the appropriate taxing authorities by delivering to Administrative Agent official tax receipts or notarized copies or other evidence thereof satisfactory to Administrative Agent, within ninety (90) days after the due date for such Tax payment. Such Bank agrees to use reasonable efforts (consistent with legal and regulatory restrictions) to designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such payment or reimbursement and will not be otherwise disadvantageous to such Bank in the sole discretion of such Bank. 3.4 Prepayment. Upon the irrevocable written notice of the Obligor ---------- to which a Loan has been made, received by Administrative Agent by 11:00 a.m. New York time on the date of the prepayment of a Reference Rate Loan and at least three (3) Eurodollar Banking Days prior to the prepayment of a Eurodollar Loan, such Obligor may prepay any Eurodollar Loan or Reference Rate Loan; but such prepayment shall be in an amount of at least One Million Dollars ($1,000,000) or multiple integrals of One Hundred Thousand Dollars ($100,000) in excess thereof unless the entire outstanding principal amount of the Loans is being prepaid. The notice of prepayment shall specify the date of the prepayment, the amount of the prepayment and the Loan to be prepaid. Each such prepayment shall be made on the date specified and, in the case of a prepayment of any Eurodollar Loan shall be accompanied by the payment of accrued interest on the amount prepaid. Subject to compliance with the foregoing procedures, Reference Rate Loans may be prepaid at any time without cost or penalty of any kind. If an Obligor elects to prepay a Eurodollar Loan, such Obligor shall, on demand by each Bank, pay such Bank the amount (if any) by which (a) the additional interest which would have been payable on the amount prepaid on such Bank's portion of such Loan had it not been paid until the last day of the Interest Period of such Loan exceeds (b) the interest which would have been recoverable by such Bank by placing such prepaid amount on deposit in the offshore Dollar interbank markets for a period starting on the date on which it was prepaid and ending on the last day of the Interest Period for such Loan. 3.5 Pro Rata Reduction of Commitments by Borrower. Borrower may, --------------------------------------------- upon thirty (30) days' prior written notice (which notice shall be irrevocable) to Banks through Administrative Agent, reduce the Total Commitment on a pro rata basis among the Banks in an aggregate amount up to the amount by which the Total Commitment exceeds the Total Utilization of Commitments at the time of such proposed reduction. Such a reduction shall be in an integral multiple of Five Million Dollars ($5,000,000). After the effective date of such 29 reduction, the Banks' obligations under this Agreement shall be based on the reduced Commitments. 3.6 Reduction of One Bank's Commitment by Borrower. If the amount of ---------------------------------------------- any payment to be made to or for the account of any Bank is increased under Section 3.3 or any Bank makes a claim under Section 3.2 then, so long as no Event of Default then exists or would result therefrom: (a) Borrower may, within sixty days after the notice thereof and by not less than five Business Days' written notice to Administrative Agent, cancel such Bank's Commitment, whereupon such Bank shall cease to be obligated to participate in further Loans hereunder and its Commitment shall be reduced to the amount of its outstanding Loans until such Loans are repaid by the Obligors either on the Principal Repayment Date for such Loans or pursuant to Section 3.6(b), at which time such Bank's Commitment shall be reduced to zero; and (b) if Borrower cancels such Bank's Commitment pursuant to clause (a) above and if Borrower so elects by written notice to Administrative Agent given at the same time as the notice referred to in clause (a) above, the Obligors shall prepay such Bank's portion of each outstanding Loan together with any accrued interest thereon plus all costs and expenses (including broken funding costs in connection with the re-lending, re-borrowing, funding or other employing of funds) incurred by such Bank as a result of such cancellation or prepayment on a date other than the Principal Repayment Date for such Loan. 3.7 Notice of Reductions. Each notice of reduction or prepayment -------------------- given pursuant to Section 3.4, 3.5 or 3.6 shall be irrevocable, shall specify the date upon which such reduction or prepayment is to be made and, in the case of a notice of prepayment, shall obligate the Obligors to make such prepayment on such date. Borrower may not give a notice of reduction of a part of the Commitment pursuant to Section 3.6 at any time prior to the date so specified in any previous such notice. 3.8 Designation of Replacement Bank. If the Commitment of any Bank ------------------------------- is cancelled by Borrower pursuant to Section 3.6 or if any Bank terminates its Commitment with respect to Eurodollar Loans pursuant to Section 4.2, Borrower, with the consent of Administrative Agent, may designate an Eligible Assignee (or, if it deems appropriate, more than one Eligible Assignee) acceptable to Administrative Agent to act as a Bank hereunder and upon execution of an Assignment and Acceptance by such Eligible Assignee, such Eligible Assignee shall be deemed a Bank hereunder to the same extent as if it were a signatory hereto and, thereafter, such Eligible Assignee shall for all purposes be considered a "Bank" hereunder; provided that the Commitment assigned to the new -------- Bank thereby shall not exceed the Commitment of the replaced Bank. 3.9 Effect of Reduction of Commitment. If, at any time: --------------------------------- (i) the Commitment of any Bank is reduced to zero in accordance with the terms of this Agreement; (ii) all indebtedness and other amounts owed to such Bank by the Obligors hereunder or in connection herewith have been satisfied in full; and 30 (iii) such Bank is under no further actual or contingent obligation hereunder, then such Bank shall cease to be a party hereto and a Bank for the purposes hereof; provided, however, that the obligations of the Obligors under Sections -------- ------- 2.15, 2.16, 3.1, 3.2, 3.3, 11.13, 11.14 and 11.15 shall survive the cancellation of the Commitment and the termination of this Agreement. 3.10 Accrued Fees. On the date of the cancellation of any portion of ------------ the Total Commitment in accordance with Section 3.5 or of any Bank's Commitment under Section 3.6, all accrued Facility Fees for such portion of the Total Commitment or of such Bank's Commitment shall be paid in full by Borrower. 3.11 Survival. The agreements and obligations of Borrower in this -------- Section 3 shall survive the termination of this Agreement. SECTION 4 --------- CHANGE IN CIRCUMSTANCES AFFECTING LOANS --------------------------------------- 4.1 Inability to Determine Eurodollar Rate. If any Reference Bank -------------------------------------- determines (which determination shall be made in Good Faith and shall be conclusive and binding upon the Obligors that (i) by reason of circumstances then affecting the Eurodollar interbank market, adequate and reasonable means do not or will not exist for ascertaining the interest rate applicable to any Eurodollar Loans, or (ii) Dollar deposits in the relevant amounts and for the relevant Interest Period are not available to the Banks in the Eurodollar interbank market, then it shall notify the Administrative Agent who shall forthwith give written notice of such determination to Borrower and each Bank at least one (1) Business Day prior to the first day of any Interest Period so affected; whereupon, until Administrative Agent shall notify Borrower that the circumstances giving rise to such suspension no longer exist, (x) the obligations of the Banks to make Eurodollar Loans shall be suspended and (y) the Obligors shall repay in full, without premium or penalty, the then outstanding principal amount of the Eurodollar Loans, together with accrued interest thereon, on the last day of the then current Interest Period pursuant to the next sentence. Unless an Obligor notifies Administrative Agent to the contrary within one (1) Business Day after receiving a notice from Administrative Agent pursuant to this Section, an Obligor shall, concurrently with repaying the Eurodollar Loans pursuant to this Section, be deemed automatically without any further notice to Administrative Agent or the Banks to have requested and received Reference Rate Loans in an equal principal amount from the Banks, the proceeds of which are deemed to have been used to repay the other Loans. 4.2 Illegality. If, after the Effective Date, the introduction of ---------- or any change in any applicable law, rule or regulation or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof or compliance by any Bank with any request or directive (whether or not having the force of law) of any such authority shall make it unlawful or impossible for such Bank (or its Lending Office) to make, maintain or fund its Eurodollar Loans, such Bank shall forthwith give written notice thereof to Administrative Agent and to Borrower. Before giving any notice pursuant to this Section, such Bank agrees to use reasonable efforts (consistent with legal and regulatory restrictions) to 31 designate a different Lending Office if such designation will avoid the need for giving such notice and will not be otherwise disadvantageous to such Bank in the sole judgment of such Bank. Upon receipt of such notice (i) if such Bank has received a request with respect to Eurodollar Loans and has not yet made such Loan, a Reference Rate Loan shall be deemed to have been designated without any further notice; (ii) all Loans which would otherwise be made by such Bank as Eurodollar Loans shall be made instead as Reference Rate Loans; and (iii) the Obligor to which such Eurodollar Loans were made shall prepay in full, without premium or penalty, the then outstanding principal amount of such Bank's Eurodollar Loans, together with accrued interest, on either (x) the last day of the then-current Interest Period if such Bank may lawfully continue to fund and maintain such Eurodollar Loans, to such day or (y) immediately if such Bank may not lawfully continue to fund and maintain such Eurodollar Loans to such day together with an amount, if any, calculated as set forth in the last sentence of Section 3.4. Concurrently with prepaying each such Eurodollar Loan such Obligor shall borrow a Reference Rate Loan from such Bank in an amount equal to the principal amount of such Bank's Eurodollar Loans, the proceeds of which are deemed to have been used to repay such Bank's Eurodollar Loans. If circumstances subsequently change so that such Bank is not further affected, and no Eligible Assignee has been appointed pursuant to Section 3.8, such Bank shall so notify Borrower and Administrative Agent and such Bank's obligation to make and continue Eurodollar Loans shall be reinstated upon written request of Borrower. SECTION 5 --------- CONDITIONS PRECEDENT -------------------- 5.1 Initial Conditions Precedent. The obligation of Banks to make ---------------------------- the initial Loan hereunder is subject to the condition that on or before the Effective Date, (a) there shall have been delivered to Administrative Agent with counterparts for each Bank and in form and substance satisfactory to Administrative Agent, each dated the Effective Date unless otherwise indicated: (i) The Guaranties, duly executed and delivered by each of the Guarantors; (ii) Certified copies of the resolutions of the Board of Directors of each Obligor approving this Agreement, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement; (iii) A certificate of the Secretary or an Assistant Secretary of each Obligor certifying the names and true signatures of the officers of such Obligor authorized to sign this Agreement and the other documents to be delivered hereunder; (iv) Certified copies of each Obligor's Certificate of Incorporation or Deed of Incorporation, together with a good standing certificate from its jurisdiction of incorporation, each to be dated a recent date prior to the Effective Date; (v) Copies of each Obligor's Memorandum of Association and Articles of Incorporation or Articles of Association and Extract from Commercial Register, certified as of the Effective Date by its Secretary or an Assistant Secretary; 32 (vi) Favorable opinions of (A) Graham Thompson & Company, Bahamas counsel for the Borrower and Dish Placement, substantially in the form of Exhibit F-1 hereto, (B) Trenite Van Doorne, counsel for White Holding, substantially in the Form of Exhibit F-2 hereto, (C) Wilmer, Cutler & Pickering, New York counsel for the Obligors, substantially in the form of Exhibit G hereto, (D) the Assistant General Counsel of Hughes, substantially in the form of Exhibit H-1 hereto, and (E) counsel for each Guarantor (other than Hughes), substantially in the form of Exhibit H-2 hereto; (vii) A favorable opinion of O'Melveny & Myers LLP, special counsel for the Administrative Agent, substantially in the form of Exhibit I hereto; (viii) Certified copies of the resolutions of the Board of Directors of each Guarantor, approving the Guaranty to which it is a party, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to such Guaranty; (ix) A certificate of the Secretary or an Assistant Secretary of each Guarantor (or, in the case of a foreign Guarantor, a similar officer for companies in such foreign country) certifying the names and true signatures of the officers of such Guarantor authorized to sign the Guaranty to which it is a party and the other documents to be delivered hereunder; (x) Certified copies of the Certificate of Incorporation of each Guarantor above, together with good standing certificates from the jurisdiction of its incorporation and its principal place of business, each to be dated a recent date prior to the Effective Date (or, with respect to foreign Guarantors, such appropriate similar documents for companies in such foreign country); (xi) Copies of the Bylaws of each Guarantor (or, with respect to Darlene Investments LLC, its Memorandum of Association and Articles of Association), certified as of the Effective Date by its Secretary or an Assistant Secretary (or, in the case of Darlene Investments LLC, a similar officer for companies in the Cayman Islands); and (xii) Such other instruments, information or documents as Administrative Agent or Majority Banks may reasonably request. (b) Borrower shall have paid (i) to Administrative Agent, for distribution (as appropriate) to Administrative Agent and the Arranger the fees and expenses payable on the Effective Date pursuant to the Letter Agreement and (ii) to O'Melveny & Myers LLP its fees and expenses payable pursuant to Section 11.13 hereof through the Effective Date. (c) Administrative Agent shall have received an officers' certificate from Borrower, dated the Effective Date, in form and substance satisfactory to Administrative Agent, to the effect that the representations and warranties in Section 6 hereof are true, correct and complete in all material respects on and as of the Effective Date to the same extent as though made on and as of that date. (d) Administrative Agent shall have received a certificate, signed by the Treasurer or an Assistant Treasurer of Hughes dated the Effective Date certifying that (i) since December 31, 1998 there has been no change in Hughes' financial condition or results of 33 operations which constitutes a Material Change; and (ii) to the knowledge of Hughes, that there is no pending or threatened litigation, proceeding or investigation that is reasonably likely to have a material adverse effect on the properties, business, operations or conditions (financial or otherwise) of the Borrower or of Hughes or that purports to affect this Agreement or the transactions contemplated hereby. (e) Administrative Agent shall have received evidence in form and substance satisfactory to it that all commitments under the Credit Agreement dated as of September 24, 1997, as amended, among Borrower, Dish Placement, the banks party thereto, and Bank of America National Trust and Savings Association, as agent for such banks, have been terminated in full, that all letters of credit issued pursuant to such credit agreement have been terminated and that all obligations payable to such banks and the agents under such credit agreement have been paid in full. (f) All commitments under the Existing Citibank Agreement shall have been terminated in full, all letters of credit issued pursuant to the Existing Citibank Agreement shall have been terminated and all obligations payable to the banks and agents under the Existing Citibank Agreement shall have been paid in full. (g) All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent, acting on behalf of Banks, and its counsel shall be satisfactory in form and substance to Administrative Agent and such counsel, and Administrative Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent may reasonably request. 5.2 Conditions Precedent to Loans. The obligation of Banks to ----------------------------- disburse each Loan (including the first Loan) is subject to the following conditions and by communicating a Loan Request the Obligors, jointly and severally, are deemed to certify that: (a) the representations and warranties contained in this Agreement and any other documents delivered pursuant hereto are true and correct in all material respects on the date of such Loan Request; (b) the financial statements delivered to Administrative Agent by Borrower pursuant to Section 7.5 on the date most nearly preceding the Loan Request present fairly the financial position and results of operation and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such statements relate, (subject, in the case of unaudited financial statements to year end adjustments) and there has been no Material Change since the date of such financial statements; (c) there has been no change in Hughes' financial condition or results of operations which constitutes a Material Change; (d) to the knowledge of Hughes, there is no pending or threatened litigation, proceeding or investigation that Hughes believes is reasonably likely to have a material adverse effect on the properties, business, operations (financial or otherwise) of the Borrower or of Hughes or that purports to affect this Agreement, the Hughes Guaranty or the transactions contemplated hereby or thereby; and (e) no Event of Default or Unmatured Event of Default has occurred and is continuing except such Events of Default or Unmatured Events of Default as have been expressly waived by or on behalf of the Banks. 34 5.3 Conditions to Letter of Credit. The obligation of an Issuing ------------------------------ Bank to issue any Letter of Credit hereunder is subject to the following conditions precedent: (a) On or before the date of issuance of such Letter of Credit, Administrative Agent and the applicable Issuing Bank shall have received, in accordance with the provisions of subsection 2.11(b)(i), an originally executed L/C Request and an originally executed application for issuance of letter of credit in the standard form then utilized by the applicable Issuing Bank, in each case signed by the chief executive officer, the chief financial officer or the treasurer of the Obligor requesting such Letter of Credit or by any executive officer of such Obligor designated by any of the above-described officers on behalf of such Obligor in a writing delivered to Administrative Agent, together with all other information specified in subsection 2.11(b)(i) and such other documents or information as the applicable Issuing Bank may reasonably require in connection with the issuance of such Letter of Credit. (b) On the date of issuance of such Letter of Credit, all conditions precedent described in Section 5.2 shall be satisfied to the same extent as if the issuance of such Letter of Credit were the making of a Loan and the date of issuance of such Letter of Credit were a Borrowing Date. Each Issuing Bank shall be entitled to assume that the conditions precedent set forth in Sections 5.3(a) and (b) have been satisfied unless such Issuing Bank has received written notice from Administrative Agent to the contrary. SECTION 6 --------- REPRESENTATIONS AND WARRANTIES ------------------------------ 6. Borrower (and, with respect to a representation or warranty relating to a Designated Subsidiary, such Designated Subsidiary jointly and severally) represents and warrants as follows: 6.1 Authority of Borrower. Borrower (a) is an international business --------------------- company duly organized and existing under the laws of the Bahamas, with its principal place of business in the Bahamas, (b) has the corporate power to own its property and carry on its business as now being conducted, (c) is duly qualified and authorized to do business, and is in good standing in every state, country or other jurisdiction where the failure to be so qualified, authorized and in good standing would have a material adverse effect on Borrower, (d) has full power and authority to borrow the sums provided for in this Agreement, to execute, deliver and perform this Agreement and any instrument or agreement required hereunder, and to perform and observe the terms and provisions hereof and thereof, (e) has taken all corporate action on the part of Borrower, its directors or stockholders, necessary for the authorization, execution, delivery and performance of this Agreement, and any instrument or agreement required hereunder on the date hereof, (f) requires no consent or approval of any trustee or holder of any indebtedness or obligation of Borrower to enter into, deliver or perform its obligations under this Agreement and the Notes, and (g) requires no consent, permission, authorization, order or license of any governmental authority in connection with the execution and delivery and performance of this Agreement and any instrument or agreement required hereunder, or any transaction contemplated 35 hereby, except as may have been obtained and certified copies of which have been delivered to Banks through Administrative Agent. 6.2 Binding Obligations. This Agreement is the legal, valid and ------------------- binding obligation of Borrower and each Designated Subsidiary, enforceable against each of them in accordance with its terms, and any instrument or agreement required hereunder, when executed and delivered, will be similarly valid, binding and enforceable. 6.3 Incorporation of Subsidiaries. Each Subsidiary of Borrower is a ----------------------------- corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and is duly licensed or qualified as a foreign corporation in all jurisdictions where the failure to be so qualified, authorized and in good standing would have a material adverse effect on Borrower and its Subsidiaries taken as a whole. 6.4 No Contravention. There is no charter, by-law, or capital stock ---------------- provision of Borrower or any Designated Subsidiary and no provision of any indenture or material agreement, written or oral, to which Borrower or any Designated Subsidiary is a party or under which Borrower or such Designated Subsidiary is obligated, nor is there any statute, rule or regulation, or any judgment, decree or order of any court or agency binding on Borrower or any Designated Subsidiary which would be contravened by the execution, delivery and performance of this Agreement, or any instrument or agreement required hereunder, or by the performance of any provision, condition, covenant or other term hereof or thereof. 6.5 Notices. Except as previously disclosed in writing to ------- Administrative Agent, no event has occurred which would require Borrower or any Designated Subsidiary to notify Administrative Agent and the Banks pursuant to Section 7.3 hereof. 6.6 Financial Statements. All financial statements furnished by -------------------- Borrower to Banks present fairly the financial position and results of operation and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such statements relate, (subject to normal year-end adjustments), and such financial statements have been prepared in accordance with GAAP. Since the date of the audited financial statements most recently furnished by Borrower to Banks, there has been no change in Borrower's consolidated financial condition or results of operations sufficient to impair Borrower's ability to repay the Loans in accordance with the terms hereof. Neither Borrower nor any Subsidiary had any contingent obligations, liabilities for taxes or other outstanding financial obligations at that date which are material in the aggregate, except as disclosed in such statements. 6.7 ERISA. Borrower, any of its Subsidiaries or any other ERISA ----- Affiliate has never had, does not have, and will not have, any Plans. 6.8 Use of Proceeds; Margin Regulations; Investment Act. Neither --------------------------------------------------- Borrower nor any Designated Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purposes of purchasing or carrying any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System. No portion of the proceeds of any borrowing under this Agreement has been or will be used by 36 Borrower or any Designated Subsidiary or any of their respective Subsidiaries in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System in effect on the date or dates of such borrowing and such use of proceeds. Neither Borrower nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940. 6.9 Taxes. Each of Borrower and the Designated Subsidiaries has ----- filed all federal, state and foreign tax returns which to the knowledge of the financial officers of Borrower and the Designated Subsidiaries are required to have been filed, and has paid prior to delinquency all taxes that have become due pursuant to said returns or pursuant to any assessment, except as are being contested in Good Faith by appropriate proceedings and as to which adequate reserves have been provided on the books of Borrower and the Designated Subsidiaries in accordance with GAAP. 6.10 Insurance. Borrower and its Subsidiaries will obtain and --------- maintain insurance with responsible insurance companies, in such amounts and against such risks as is customarily carried by owners of similar businesses and property, to the extent such insurance is reasonably available at commercially reasonable rates, and it will furnish Administrative Agent, upon written request, with full information as to the insurance carrier; provided, however, -------- ------- that Borrower and its Subsidiaries may self insure to the extent they reasonably deem prudent. 6.11 Liens. The properties and assets of Borrower and its ----- Subsidiaries, real, personal and mixed, are not subject to any Liens, except for Liens permitted by this Agreement. 6.12 Absence of Litigation; Litigation Description. No actions, --------------------------------------------- suits, investigations, litigation or proceedings are pending or, to the knowledge of Borrower, threatened against or affecting Borrower or any of its Subsidiaries or the properties of Borrower or any such Subsidiary before any court, arbitrator or governmental agency, department, commission, board, bureau or instrumentality, domestic or foreign, (a) that could reasonably be expected to result in a Material Change, or (b) which purports to affect the legality, validity or enforceability of this Agreement, any of the Guaranties or any other document delivered hereunder. 6.13 Authorizations and Approvals. No authorization or approval ---------------------------- (including exchange control approval) or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower and each Designated Subsidiary of this Agreement except for such authorizations, approvals or filings which have been duly obtained or made and are in full force and effect on the Effective Date. 6.14 Taxes. There is no tax, levy, impost, deduction, charge or ----- withholding imposed by the Bahamas or The Netherlands or any political subdivision thereof either (i) on or by virtue of the execution or delivery of this Agreement or any other document to be furnished hereunder or (ii) on any payment to be made by the Borrower or a Designated Subsidiary pursuant to this Agreement. 37 6.15 Enforcement. This Agreement is in proper legal form under the ----------- laws of the Bahamas for the enforcement thereof against the Borrower and Dish Placement under the laws of the Bahamas; and to ensure the legality, validity, enforceability or admissibility in evidence of this Agreement in the Bahamas, it is not necessary that this Agreement or any other document be filed or recorded with any court or other authority in the Bahamas or that any stamp or similar tax be paid on or in respect of this Agreement or any other document to be delivered hereunder. This Agreement is in proper legal form under the laws of The Netherlands for the enforcement thereof against White Holding under the laws of The Netherlands; and to ensure the legality, validity, enforceability or admissibility in evidence of this Agreement in The Netherlands, it is not necessary that this Agreement or any other document be filed or recorded with any court or other authority in The Netherlands or that any stamp or similar tax be paid on or in respect of this Agreement or any other document to be delivered hereunder. 6.16 Authority of Designated Subsidiaries. Each Designated ------------------------------------ Subsidiary (a) is a company duly organized and existing under (x) in the case of Dish Placement Services, Ltd., the laws of the Bahamas, with its principal place of business in the Bahamas, and (y) in the case of White Holding, the laws of the Netherlands, with its principal place of business in The Netherlands, (b) has the corporate power to own its property and carry on its business as now being conducted, (c) is duly qualified and authorized to do business, and is in good standing in every state, country or other jurisdiction where the failure to be so qualified, authorized and in good standing would have a material adverse effect on Borrower and its Subsidiaries, taken as a whole, (d) has full power and authority to borrow the sums provided for in this Agreement, to execute, deliver and perform this Agreement and any instrument or agreement required hereunder, and to perform and observe the terms and provisions hereof and thereof, (e) has taken all corporate action on the part of such Designated Subsidiary, its directors or stockholders, necessary for the authorization, execution, delivery and performance of this Agreement, and any instrument or agreement required hereunder on the date hereof, (f) requires no consent or approval of any trustee or holder of any indebtedness or obligation of such Designated Subsidiary to enter into, deliver or perform its obligations under this Agreement and the Notes, and (g) requires no consent, permission, authorization, order or license of any governmental authority in connection with the execution and delivery and performance of this Agreement and any instrument or agreement required hereunder, or any transaction contemplated hereby, except as may have been obtained and certified copies of which have been delivered to Banks through Administrative Agent. 6.17 Year 2000 Compliance. Each of the Obligors has a comprehensive -------------------- program to address the "year 2000 problem" (that is, the inability of computers, as well as embedded microchips in non-computing devices, to properly perform date-sensitive functions with respect to certain dates prior to and after December 31, 1999). That program has been implemented substantially in accordance with the timetable for implementation and each of the Obligors reasonably anticipates that it will substantially avoid the year 2000 problem as to all computers, as well as embedded microchips in non-computing devices, that are material to the business of the Borrower and its Subsidiaries. Each of the Obligors has adequate contingency plans to ensure uninterrupted and unimpaired business operation in the event of a failure of its own or a third party's systems or equipment due to the year 2000 problem, including those of vendors, customers and suppliers, as well as a general failure of or interruption in its communications and delivery infrastructure. 38 SECTION 7 --------- AFFIRMATIVE COVENANTS OF BORROWER --------------------------------- 7. Borrower covenants and agrees that so long as the credit hereby granted shall remain available in whole or in part or until the full and final payment of all indebtedness incurred hereunder (including with respect to Accepted Time Drafts) and the cancellation or expiration of all Letters of Credit, unless Majority Banks waive compliance in writing: 7.1 Use of Proceeds of Loans. It will, and will cause each ------------------------ Designated Subsidiary to, use the proceeds of the Loans made by Banks to Borrower and such Designated Subsidiary hereunder to finance (i) the purchase of direct-to-home IRD decoder boxes, disk antennae and related goods for satellite television in Mexico, the Caribbean, or a country located in Central America or South America, the payment of duties, value added taxes and other costs associated with the such purchase and the payment of fees, commissions and expenses incurred therewith (in compliance with all applicable legal and regulatory requirements), and (ii) the payment of interest and fees due under this Agreement. Each Obligor, as a non-bank entity located outside the United States, by execution of this Agreement, is deemed to have received notice to the effect that it is the policy of the Board of Governors of the Federal Reserve System that extensions of credit by international banking facilities may be used only to finance the non-U.S. operations of a customer (or its foreign affiliates) located outside the United States. Each Obligor hereby acknowledges that the proceeds of Loans made to such Obligor from the Banks that are such international banking facilities will be used solely to finance its operations outside the United States or that of its foreign affiliates. 7.2 Management of Business. It will manage its business and conduct ---------------------- its affairs such that the representations and warranties contained in Sections 6.1 through 6.3 and 6.7 through 6.10 remain true and correct in all material respects at all times during the Availability Period. 7.3 Notice of Certain Events. It will, and it will cause each of its ------------------------ Subsidiaries to, give prompt written notice to Administrative Agent (who shall promptly notify the Banks) of: (a) all Events of Default or Unmatured Events of Default under any of the terms or provisions of this Agreement, (b) any event of default under any other agreement, contract, indenture, document or instrument entered, or which may be entered, into by it that could, if settled unfavorably, result in a Material Change, (c) all litigation, arbitration or administrative proceedings involving Borrower or any of its Subsidiaries which could in the reasonable opinion of Borrower be expected to result in a Material Change; (d) any other matter which has resulted in, or might in the reasonable opinion of Borrower result in, a Material Change; and (e) any material change in Borrower's ownership or ownership structure. 7.4 Records. It will, and it will cause each of its Subsidiaries to, ------- keep and maintain full and accurate accounts and records of its operations according to GAAP and will permit Administrative Agent, and its designated officers, employees, agents and representatives, to have access thereto and to make examination thereof at all reasonable times, to make audits, and to inspect and otherwise check its properties, real, personal and mixed; provided, however, -------- ------- that such examination and access shall be in compliance with security and confidentiality 39 requirements of all governmental authorities and, subject to Section 11.15, Borrower's corporate policies. 7.5 Information Furnished. It will furnish to Banks and Administrative --------------------- Agent: (a) Within sixty (60) days after the close of each quarter, except for the last quarter of each fiscal year, its consolidated balance sheet as of the close of such quarter and its consolidated profit and loss statement and cash flow statement for that quarter and for that portion of the fiscal year ending with such quarter, all prepared in accordance with GAAP, and all certified by its chief financial officer as presenting fairly the financial position and results of operations and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such statements relate, subject to normal year-end adjustments. (b) Within one hundred twenty (120) days after the close of each fiscal year, a complete copy of its annual financial statements, which statements shall include at least its consolidated balance sheet as of the close of such fiscal year and its consolidated profit and loss statement and cash flow statement for such fiscal year, prepared by Deloitte & Touche LLP (or such other independent certified public accountants of recognized international standing selected by Borrower) in accordance with GAAP applied on a basis consistent with that of the previous year, and which statements shall include the opinion of such accountants, such opinion not to be qualified or limited because of any restricted or limited nature of examination made by such accountants or because of a going concerns qualification. (c) Within sixty (60) days after the close of each quarter, except for the last quarter of each fiscal year, (and within one hundred twenty (120) days after the close of each fiscal year) its certificate executed by Borrower's chief financial officer that (i) the representations and warranties set forth in Section 6 are true and correct in all material respects; (ii) there has been no Material Change since the date of the financial statements delivered to Administrative Agent pursuant to Section 7.5 on the date most nearly preceding the certificate; and (iii) no Event of Default or Unmatured Event of Default has occurred and is continuing except such Events of Default or Unmatured Events of Default as have been expressly waived by or on behalf of the Banks. (d) Such other information concerning its affairs as Administrative Agent or the Majority Banks may reasonably request. 7.6 Execution of Other Documents. It will, and will cause each ---------------------------- Designated Subsidiary to, promptly, upon demand by Administrative Agent, execute all such additional agreements, documents and instruments in connection with this Agreement as Administrative Agent or Majority Banks may reasonably deem necessary. 7.7 Administrative Agent's and Arranger's Fees. It will compensate ------------------------------------------ Administrative Agent and Arranger as set forth in the Letter Agreement. 7.8 Compliance with Law. It will, and will cause each of its ------------------- Subsidiaries to, comply with the requirements of all applicable laws, rules, regulations, and orders of any 40 governmental or regulatory authority, a breach of which would result in a Material Change, except where contested in Good Faith by appropriate proceedings diligently pursued. 7.9 Maintenance of Properties, Etc. It will, and will cause each of ------------------------------- its Subsidiaries, to maintain and preserve all of its properties with respect to which failure to so maintain and preserve would have a Material Change. SECTION 8 --------- NEGATIVE COVENANTS OF BORROWER ------------------------------ 8. Borrower covenants and agrees that so long as the credit hereby granted shall remain available in whole or in part or until the full and final payment of all indebtedness incurred hereunder (including with respect to Accepted Time Drafts) and the cancellation or expiration of all Letters of Credit, unless Majority Banks waive compliance in writing: 8.1 Liens. ----- (a) Borrower will not, nor will it permit any Subsidiary to, (i) sell (with or without recourse) any of its accounts receivable or any asset consisting of a loan, advance or capital contribution to any Person, or (ii) issue, incur, guaranty, assume or permit to exist any Indebtedness or Hedging Obligations secured by a Lien upon any property or assets of Borrower or any Subsidiary or upon any shares of stock or Indebtedness or Hedging Obligations of any Subsidiary (whether such property, assets, shares of stock or Indebtedness or Hedging Obligations are now owned or hereafter acquired) without in any such case effectively providing concurrently with the issuance, incurrence, guarantee or assumption of any such Indebtedness or Hedging Obligations that the Commitments and Loans and any other obligations of Borrower to the Banks (together with, if Borrower shall so determine, any other Indebtedness or Hedging Obligations of Borrower or such Subsidiary ranking equally with the Commitments and Loans and such other obligations and then existing or thereafter created) shall be secured equally and ratably with or prior to such Indebtedness or Hedging Obligations by a Lien upon such property, assets, shares of stock or indebtedness; (b) The above restrictions shall not apply to Indebtedness or Hedging Obligations of Borrower or any of its Subsidiaries secured by (1) Liens on property, assets, shares of stock or indebtedness of any corporation existing at the time such corporation becomes a Subsidiary; (2) Liens on fixed assets existing at the time of acquisition of such fixed assets by Borrower or a Subsidiary, or Liens to secure the payment of all or any part of the purchase price of fixed assets upon the acquisition of such fixed assets by Borrower or a Subsidiary or to secure any indebtedness incurred or guaranteed prior to, at the time of, or within 180 days after, the later of the date of acquisition of such property and the date such property is placed in service, for the purpose of financing all or any part of the purchase price thereof, or Liens to secure any indebtedness incurred or guaranteed for the purpose of financing the cost to Borrower or a Subsidiary of improvements to such acquired fixed assets; (3) Liens securing indebtedness of a Subsidiary owing to Borrower or to another wholly-owned Designated Subsidiary; (4) Liens on property of a corporation existing at the time such corporation is merged or consolidated with Borrower or a Subsidiary (in accordance with Section 8.2) or at the time of a sale, lease or other disposition of the properties of a corporation as an entirety or substantially as an entirety to 41 Borrower or a Subsidiary; or (5) any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any Liens referred to in the foregoing sub-clauses (1) to (4), inclusively; provided, however, that the principal amount of indebtedness secured thereby - -------- ------- shall not exceed the principal amount of indebtedness so secured at the time of the incurrence or guarantee thereof and that such extension, renewal or replacement shall be limited to all or a part of the property which secured the Lien so extended, renewed or replaced (plus improvements on such property); and (c) Notwithstanding the provisions of Section 8.1(a) above, (i) the Obligors may sell at par for cash (without recourse) to one or more of the Guarantors, GLA or any shareholder of any LOC who is guaranteeing the obligations of such LOC to such Obligor, all or any portion of one or more of the promissory notes issued by any LOC or any Subsidiary of Borrower to the order of an Obligor to evidence loans and advances made by an Obligor to such LOC or to such Subsidiary of Borrower (individually a "LOC/Subsidiary Note" and collectively the "LOC/Subsidiary Notes"), together with the rights of such Obligor pursuant to any security agreements securing the applicable LOC/Subsidiary Note so purchased (the "Associated Collateral Rights"), or if less than the entire amount of a LOC/Subsidiary Note is purchased, the pro rata portion of the Associated Collateral Rights securing the portion of the LOC/Subsidiary Note so purchased; provided that Borrower shall apply or cause -------- the application of the proceeds of any such sales of LOC/Subsidiary Notes to the payment of principal or interest on the Loans or fees payable hereunder; and (ii) the Obligors may grant to the Guarantors, or any of them, a second priority security interest in the LOC/Subsidiary Notes and the Associated Collateral Rights, provided that (A) Administrative Agent, on behalf of the Banks, shall have been granted a first priority security interest in the LOC/Subsidiary Notes and Associated Collateral Rights, (B) the LOC/Subsidiary Notes and documentation evidencing the Associated Collateral Rights shall be held by a third party collateral agent reasonably acceptable to Administrative Agent and the Majority Banks, (C) the Guarantors holding such second priority security interest shall not be entitled to exercise any rights or remedies with respect thereto (including foreclosure remedies) until all Loans, interest thereon and all other amounts payable under this Agreement shall have been indefeasibly paid in full; (D) all documentation evidencing such first priority security interest of Administrative Agent, such second priority security interest of the Guarantors, the appointment and duties of such collateral agent and all other related matters shall be in form and substance satisfactory to Administrative Agent and the Majority Banks. 8.2 Mergers, Liquidations and Sales of Assets. Borrower will not, ----------------------------------------- nor will it permit any of its Subsidiaries to (a) liquidate or dissolve or enter into any consolidation, merger (except mergers between a Subsidiary and Borrower in which Borrower is the surviving corporation), partnership, joint venture, syndicate, pool or other combination which results in a material change in the nature of Borrower's business taken as a whole, unless in the case of a consolidation or merger, Borrower is the surviving corporation, and after giving effect to any such consolidation or merger no Event of Default or Unmatured Event of Default has occurred and is continuing, or (b) (except assets conveyed, sold or leased from one Subsidiary to another Designated Subsidiary or from any Subsidiary to Borrower) convey, sell or lease all or the greater part of its assets or business; provided that Borrower or any of its Subsidiaries may make -------- loans and advances to LOC's in the ordinary course of business, or (c) (except in a transaction which does not result in a Material Change), sell, lease, transfer or assign any operating rights, licenses or franchises. 42 8.3 Compliance with Margin Regulations. Borrower will not, and will ---------------------------------- not permit any Designated Subsidiary to, engage principally, or as one of its important activities, in the business of extending credit for the purposes of purchasing or carrying any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System; and it will not, and will not permit any Designated Subsidiary to, use the proceeds of any Loan for the purpose, directly or indirectly, whether immediate, incidental or ultimate, (a) to purchase or carry, within the meaning of such Regulation U, any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock, or (b) in a manner which would violate, or result in a violation of, Regulation T, U or X of the Board of Governors of the Federal Reserve System. 8.4 Compliance with Law, etc. Borrower shall not (i) violate, or ------------------------- allow any of its Subsidiaries to violate, any laws, ordinances, government rules or regulations to which it is or may become subject or (ii) fail, or allow any of its Subsidiaries to fail, to obtain or maintain any patents, trademarks, service marks, trade names, copyrights, design patents, licenses, permits, franchises or other governmental authorizations necessary to the ownership of its property or the conduct of its business, in either case where such failure could reasonably be expected to have a Material Change. 8.5 Change in Business. Borrower will not and will not permit any ------------------ Subsidiary to make, any material change in the nature or conduct of their respective businesses as carried on at the date hereof. 8.6 Ownership of Designated Subsidiaries. Borrower will not fail to ------------------------------------ own 100% of the capital stock (other than directors' qualifying shares) of each of the Designated Subsidiaries. 8.7 ERISA. Borrower will not and will not permit any Subsidiary or ----- ERISA Affiliate to provide for or establish any Plan. SECTION 9 --------- EVENTS OF DEFAULT ----------------- 9.1 Events of Default. If one or more of the following described Events ----------------- of Default shall occur: (a) Any Obligor shall default in the due and punctual payment of (i) the principal of any Loan within two (2) Business Days of its due date, (ii) the interest on any Loan or any fee required to be paid by any Obligor hereunder within ten (10) Days of its due date, (iii) the amount required to be paid by any Obligor to an Issuing Bank pursuant to the reimbursement obligations with respect to any drawing under a Letter of Credit within two (2) Business Days of the date a demand therefor is made as provided in Section 2.13(b)(ii), or (iv) any other amount due from it hereunder within thirty (30) Business Days of its due date; or (b) (i) Borrower or any of its Subsidiaries shall fail to perform or observe any of the terms, provisions, covenants, conditions, agreements or obligations contained in this Agreement (other than those contained in Sections 7.2, 7.3 (except Section 7.3(a) as to notices of immaterial Unmatured Events of Default), 7.4, 7.8, 7.9, and 8.1 through 8.7) and such failure 43 shall continue for more than twenty (20) days after written notice from Administrative Agent to Borrower, Hughes and the Guarantor Notice Agent of the existence and character of such failure to perform or observe; or (ii) Borrower or any of its Subsidiaries shall fail to perform or observe any of the terms, provisions, covenants, conditions, agreements or obligations contained in Sections 7.2, 7.4, 7.8 and 7.9, and such failure is not remedied within thirty (30) days (such period being the "Grace Period") after written notice from Administrative Agent to Borrower, Hughes and Guarantor Notice Administrative Agent of the existence and character of such failure; provided, however, that -------- ------- if, upon the expiration of the Grace Period, Borrower or such Subsidiary, as the case may be, is using its best efforts to remedy such failure and in the reasonable opinion of Borrower (as certified by Borrower to Administrative Agent), such failure is capable of being remedied, Borrower or such Subsidiary, as the case may be, shall have such additional time, not to exceed 30 days after the expiration of the Grace Period, as shall be reasonably necessary to remedy such failure; or (c) Borrower or any of its Subsidiaries shall fail to perform or observe any of the terms, provisions, covenants, conditions, agreements or obligations on its part to be performed or observed in Section 7.3 (other than Section 7.3(a) as to notices of immaterial Unmatured Events of Default) and Sections 8.1 through 8.7; or (d) (i) Borrower or any of its Subsidiaries shall become insolvent, or be unable, or admit in writing its inability, to pay its debts as they become due; or (ii) Borrower or any Subsidiary shall make an assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its properties or assets; or (iii) Borrower or any Subsidiary shall file or have filed against it a petition in bankruptcy or seeking reorganization or to effect a plan or other arrangement with creditors or winding up or dissolution, or seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debt under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property, and such filing against it shall not be dismissed within sixty (60) days after the date of such filing; or (iv) Borrower or any Subsidiary shall apply for or consent to the appointment of or consent that an order be made appointing any receiver or trustee for any of its or their properties, assets or business, or if a receiver or a trustee shall be appointed for all or a substantial part of its or their properties, assets or business; or (v) an order for relief shall be entered against Borrower or any Subsidiary under the United States federal bankruptcy laws or the bankruptcy laws of the Bahamas or The Netherlands as now or hereafter in effect; or (vi) Borrower or any Subsidiary shall take any action indicating its consent to, approval of or acquiescence in, any of the foregoing; or (e) Any representation or warranty made by an Obligor herein or in any certificate or financial or other statement heretofore or hereafter furnished by Borrower or any Designated Subsidiary or any of their respective officers to Administrative Agent or the Banks, or by any Guarantor in any Guaranty, proves to be in any material respect false or misleading as of the date when made, deemed made or reaffirmed; or (f) Any final judgment, decrees, writs of execution, attachments or garnishments or any Liens, or any other legal processes shall be issued or levied against any of 44 the assets or property of Borrower or any of its Subsidiaries (and shall not have been vacated, discharged or stayed) in amounts which in the aggregate would result in a Material Change (without limiting the generality of the foregoing, a judgment in excess of $10,000,000 in the aggregate shall, for purposes only of this Section 9.1 (f), be deemed to result in a Material Change); provided, -------- however, that such aggregate amount shall include only amounts in excess of (i) - ------- insurance coverage therefor and (ii) reserves on the books of Borrower or any of its Subsidiaries therefor; provided, further, that such aggregate amount shall -------- ------- not include any amounts with respect to matters subject to appeal conducted in Good Faith and diligently pursued or other further legal process by Borrower or any of its Subsidiaries or any amounts with respect to any such legal process which Borrower or any of its Subsidiaries has detached from such property by posting of a bond or equivalent process; or (g) Any governmental authority or any Person acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of the Borrower or of any of its Subsidiaries, or shall have taken any action to displace the management of the Borrower or of any of its Subsidiaries or to curtail its authority in the conduct of the business of the Borrower or of any of its Subsidiaries; or (h) Borrower or any of its Subsidiaries (i) fails to make any payment (or otherwise satisfy) in respect of any indebtedness for money borrowed when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the document relating thereto on the date of such failure; or (ii) an event of default shall occur which permits the acceleration of indebtedness for money borrowed under any other agreement, contract, indenture, document or instrument executed, or which may be executed, by Borrower or any of its Subsidiaries, which failure or event of default has not been waived or cured; provided, however, that no Event of Default shall exist -------- ------- hereunder if the amount of the indebtedness which is not paid or may be accelerated with respect to the defaulted obligations shall not exceed in the aggregate $10,000,000; or (i) Hughes or any Successor Guarantor fails to beneficially own and control and to have economic ownership of, directly or indirectly, at least 25% of the issued and outstanding capital stock of Borrower; or (j) Hughes or any Successor Guarantor shall fail to perform or observe any term, covenant or agreement contained in the Hughes Guaranty and such failure shall continue for more than twenty (20) days after written notice from Administrative Agent to Borrower of the existence of such failure; or (k) Any provision of the Hughes Guaranty shall for any reason cease to be in full force and effect or valid and binding on Hughes or any Successor Guarantor or Hughes or any Successor Guarantor shall so state; or (l) An "Event of Default" shall have occurred and be continuing under the Hughes Credit Agreement; provided that if such "Event of Default" occurs under Section 9.1(k) or 9.1(l) of the Hughes Credit Agreement and no other "Event of Default" has occurred and is 45 continuing thereunder, then such "Event of Default" under Section 9.1(k) or 9.1(l) of the Hughes Credit Agreement shall not constitute an Event of Default hereunder so long as Hughes and any Successor Guarantor maintains an investment grade credit rating for its long-term senior unsecured debt from each of S&P and Moody's; or (m) The validity of this Agreement shall be contested by any Obligor or any legislative, executive or judicial body of the Bahamas, The Netherlands or any other jurisdiction, or any Obligor shall deny liability hereunder or thereunder (whether by a general suspension of payments or a moratorium on the payment of any class of indebtedness or otherwise), or any treaty, law, regulation, communique, decree, ordinance or policy of the Bahamas, The Netherlands or any other jurisdiction shall purport to render any provision of this Agreement invalid or unenforceable or shall purport to prevent or materially delay the performance or observance by any Obligor of its obligations hereunder; Then (a) automatically upon the occurrence of an Event of Default under Section 9.1(d), the Commitments shall immediately terminate, and all Loans, an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit) and other liabilities and obligations outstanding under this Agreement shall, without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived, be forthwith due and payable, if not herein otherwise then due and payable, together with all costs and expenses (including broken funding costs and other costs in connection with the re- lending, re-borrowing, funding or other employing of funds) incurred by the Banks as a result thereof, anything herein or in any agreement, contract, indenture, document or instrument contained to the contrary notwithstanding; and (b) at any time after the occurrence of an Event of Default other than under Section 9.1(d), and in each and every such case, unless such Event of Default shall have been remedied by the Obligors to the satisfaction of Majority Banks or waived in writing by Majority Banks (except in the case of an Event of Default under Section 9.1(a) or an Event of Default arising from the failure of Hughes or any Successor Guarantor to make payments under the Hughes Guaranty, the waiver of which shall require the consent of all the Banks), Administrative Agent may, with the consent of the Majority Banks, or shall, upon the direction of Majority Banks, immediately terminate the Commitments, whereupon the same shall be cancelled and reduced to zero and any Loan Request given in respect of a Borrowing Date occurring on or after the date of such notice of cancellation shall cease to have effect, the obligation of Administrative Agent to issue any Letter of Credit and the right of any Bank to issue any Letter of Credit hereunder shall thereupon terminate, and all Loans, all accrued interest thereon, an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit), the outstanding amount of all Accepted Time Drafts and all other liabilities and obligations outstanding under this Agreement shall, thereupon, without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived, be forthwith due and payable, if not otherwise then due and payable, together with all costs and expenses (including broken funding costs and other costs in connection with the re-lending, re-borrowing, funding or other employing of funds) incurred by the Banks as a result thereof, anything herein or in any other 46 agreement, contract, indenture, document or instrument contained to the contrary notwithstanding; provided that the foregoing shall not affect in any way the -------- obligations of Banks under subsection 2.13(c)(i). Thereafter any Bank or the Banks may immediately, and without expiration of any period of grace, enforce payment of all liabilities and obligations of the Obligors under this Agreement and under any other agreements, contracts, indentures, documents and instruments between Borrower, and/or any Designated Subsidiary and the Banks. 9.2 Recovery of Amounts Due. If any amount payable hereunder is not ----------------------- paid as and when due, each Obligor hereby authorizes Administrative Agent, each Bank and their respective affiliates to proceed, to the fullest extent permitted by applicable law, without prior notice, by right of set-off, banker's lien or counterclaim, against any moneys or other assets of such Obligor in any currency that may at any time be in the possession of Administrative Agent or any of its affiliates or such Bank or any of its affiliates, at any branch or office thereof, to the full extent of all amounts payable to Administrative Agent and the Banks hereunder. Any Bank that so proceeds or that has an affiliate that so proceeds shall forthwith give notice to Administrative Agent of any action taken by such Bank or affiliate pursuant to this Section 9.2. 9.3 Rights Cumulative. The rights of Administrative Agent and the ----------------- Banks provided for herein are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity. 9.4 Letters of Credit and Accepted Time Drafts. ------------------------------------------ (a) With respect to amounts described in the last paragraph of Section 9.1 with respect to Letters of Credit and Accepted Time Drafts, the Obligor for whose account each Letter of Credit was issued will immediately pay to Administrative Agent for its benefit and the ratable (based on the Adjusted Exposure) benefit of the Banks in same day funds at the Administrative Agent's office designated by Administrative Agent, for deposit in a special cash collateral account, which shall be an interest bearing account (the "Letter of Credit Collateral Account") to be maintained for the benefit of Administrative Agent and the ratable (based on the Adjusted Exposure) benefit of Banks at such place as shall be designated by Administrative Agent, an amount in cash equal to the maximum amount that may at any time be drawn under all Letters of Credit issued for such Obligor's account outstanding on such date (whether or not any beneficiary shall have presented, or shall be entitled at such time to present the drafts and other documents required to draw under such Letter of Credit) plus the aggregate outstanding amount of all Accepted Time Drafts (the "Letter of Credit Obligations"). (b) Each Obligor hereby pledges and assigns to Administrative Agent for its benefit and the ratable (based on the Adjusted Exposure) benefit of Banks, and grants to Administrative Agent for its benefit and the ratable (based on the Adjusted Exposure) benefit of Banks, a lien on and a security interest in the following collateral (the "Letter of Credit Collateral"): (i) the Letter of Credit Collateral Account, all cash deposited therein, and all certificates and instruments, if any, from time to time representing or evidencing the Letter of Credit Collateral Account; 47 (ii) all notes, certificates of deposit and other instruments from time to time hereafter delivered to or otherwise possessed by Administrative Agent for or on behalf of the Obligors in substitution for or in respect of any or all of the then existing Letter of Credit Collateral; (iii) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Letter of Credit Collateral; and (iv) to the extent not covered by clauses (i) through (iii) above, all proceeds of any or all of the foregoing Letter of Credit Collateral. (c) Each Obligor agrees that it will not (i) sell or otherwise dispose of any interest in the Letter of Credit Collateral or (ii) create or permit to exist any lien, security interest or other charge or encumbrance upon or with respect to any of the Letter of Credit Collateral, except for the security interest created by this Section 9.4. (d) Administrative Agent may, in its sole discretion, without notice to any Obligor or any Guarantor except as required by law and at any time from time to time, charge, set off and otherwise apply all or any part of, first, the ----- Letter of Credit Obligations relating to Letters of Credit and second, the ------ obligations of the Obligors now or hereafter existing under any of the Loan Documents, against the Letter of Credit Collateral Account or any part thereof, in such order as Administrative Agent shall elect. Administrative Agent agrees promptly to notify Borrower after any such setoff and application made by the Administrative Agent, provided that the failure to give such notice shall not -------- affect the validity of such setoff and application. Upon the full and final payment of all indebtedness incurred hereunder (including with respect to Accepted Time Drafts) and the cancellation or expiration of all Letters of Credit, the security interest granted to Administrative Agent in the Letter of Credit Collateral shall terminate and all rights to the Letter of Credit Collateral shall revert to the Obligors. The rights of Administrative Agent under this Section 9.4(d) are in addition to other rights and remedies (including, without limitation, other rights of setoff) which Administrative Agent may have. SECTION 10 ---------- THE BANKS --------- 10.1 Administration of Loan. The general administration of the Loans ---------------------- shall be by Administrative Agent and shall be governed by the provisions set forth in Exhibit B attached hereto and incorporated herein by reference. 10.2 Representations By Banks. Each Bank hereby represents that it ------------------------ will make each Loan hereunder in the ordinary course of its business and not with a view to engage in any distribution of any evidence of indebtedness to the public; provided, however, disposition of any evidence of indebtedness held by -------- ------- such Bank shall at all times be within its exclusive control subject only to the provisions of Section 11.11 hereof and Section 10 of Exhibit B. 48 SECTION 11 ---------- MISCELLANEOUS PROVISIONS ------------------------ 11.1 Amendments and Waivers. No amendment or waiver of any provision ---------------------- of this Agreement, and no consent with respect to any departure by any Obligor therefrom, shall be effective unless the same shall be in writing and signed by the Majority Banks (or by the Administrative Agent at the written request of the Majority Banks) and the Borrower and acknowledged by the Administrative Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that -------- ------- no such waiver, amendment, or consent shall, unless in writing and signed by all the Banks and the Borrower and acknowledged by the Administrative Agent, do any of the following: (a) increase or extend the Commitment of any Bank (or reinstate any Commitment terminated pursuant to Section 9.1); (b) postpone or delay any date fixed by this Agreement for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder; (c) reduce the principal of, or the rate of interest specified herein on any Loan, or any fees or other amounts payable hereunder; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Banks or any of them to take any action hereunder; (e) provide for the release or termination of, or any material amendment or waiver of or modification to, the Hughes Guaranty; (f) reduce the amount payable under the Hughes Guaranty; (g) change in any manner the obligations of Banks relating to the purchase of participations in Letters of Credit or Accepted Time Drafts; or (h) amend this Section or any provision herein providing for consent or other action by all Banks; provided, further, that no amendment, waiver or consent -------- ------- shall, unless in writing and signed by the Administrative Agent in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of the Administrative Agent under this Agreement or rights or privileges thereunder. 11.2 Notices. All notices, payments, requests, reports, information, ------- demands and other communications which any party hereto may desire, or may be required, to give or make to any other party hereto, shall (unless otherwise permitted as a telephonic notice or request hereunder) be given by mailing the same, postage prepaid, or by telex, or rapifax transmission, or by hand delivery or courier, to each party at its address set forth in Exhibit C attached hereto and incorporated herein by reference, or to such other address as may, from time to time, be specified in writing by Borrower or any Bank. Such communications shall be deemed to have been duly given and received in the case of a telex, when the telex is sent and the appropriate answer-back is received, in the case of mail when sent by pre-paid certified or registered mail correctly addressed to the addressee, in the case of rapifax transmission, when transmission has been sent, in the case of hand delivery or courier, when received. Administrative Agent may rely and act upon any Loan Request made by telex or other telexed, telephonic or facsimile instructions to Administrative Agent by any Person purporting to be an authorized Person of Borrower (and, in respect to Loans made to a Designated Subsidiary, such Designated Subsidiary), and Borrower and the Designated Subsidiary shall be unconditionally and absolutely estopped from denying the authenticity and validity of any transaction or act made by Administrative Agent or any Bank in reliance thereon. Each party hereto shall promptly confirm by telex or rapifax any telephone communication made by it to another pursuant to this Agreement but the absence of such confirmation shall not affect the validity of such communication, which shall be effective upon receipt. If there is any conflict between any 49 telephonic communication and a written confirmation, the written communication shall govern, the recipient of such communication shall be held harmless by all parties hereto with respect to any action taken in reliance on the telephonic communication prior to the time such recipient receives and has had reasonable time to review the subsequent written confirmation and initiate such corrective action as the recipient deems reasonable under the circumstances. 11.3 Waiver. Neither the failure of, nor any delay on the part of, ------ any party hereto in exercising any right, power or privilege hereunder, or under any agreement, contract, indenture, document or instrument mentioned herein, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder, or under any agreement, contract, indenture, document or instrument mentioned herein, preclude other or further exercise thereof or the exercise of any other right, power or privilege; nor shall any waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned herein, constitute a waiver of any other right, power, privilege or default or constitute a waiver of any other default of the same or of any other term or provision. All rights and remedies herein provided are cumulative and not exclusive of any rights or remedies otherwise provided by law. 11.4 New York Law. The interpretation, enforcement and effect of ------------ this Agreement, the Loans and any agreements, contracts, indentures, documents or instruments delivered in accordance herewith, shall be governed and controlled in all respects by and construed according to the substantive laws of the State of New York (including without limitation Section 5-1401 of the General Obligations Law of the State of New York), without regard to conflict of laws principles. 11.5 Headings. The headings set forth herein are solely for the -------- purpose of identification and shall not be construed as a part of the sections or subsections which they head. 11.6 Accounting Terms. All accounting terms not otherwise defined ---------------- herein have the meaning assigned to them in accordance with GAAP, provided, however, any act or condition in accordance herewith and permitted hereunder when taken, created or occurring, shall not become a violation of any section of this Agreement as a result of a subsequent change in GAAP. 11.7 Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the different parties hereto on separate counterparts, and all of said counterparts taken together shall constitute one and the same instrument. 11.8 Written Disclosure. Wherever written disclosure by an Obligor ------------------ to Banks is required or permitted by this Agreement, written disclosure to Administrative Agent by such Obligor shall constitute such disclosure. 11.9 Singular; Plural. Whenever used herein, the singular number ---------------- shall include the plural, the plural the singular, and the use of any gender shall be applicable to all genders. 11.10 Illegality. The illegality or unenforceability of any ---------- provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or 50 impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 11.11 Assignments and Participations. ------------------------------ (a) The Obligors may not assign their respective rights or obligations hereunder without the prior written consent of all the Banks. (b) Each Bank may assign to one or more Eligible Assignees or Approved Bank Affiliates all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Loans owing to it and its participations in Letters of Credit); provided, -------- however, that (i) each such assignment shall be of a constant, and not a - ------- varying, percentage of all rights and obligations under this Agreement, (ii) after giving effect to any such assignment, (1) the assigning Bank shall no longer have any Commitment or (2) the amount of the Commitment of both the assigning Bank and the Eligible Assignee or Approved Bank Affiliate party to such assignment (in each case determined as of the date of the Assignment and Acceptance with respect to such assignment) shall not be less than the lesser of (A) $10,000,000 and (B) the quotient derived from dividing the product of (x) $10,000,000 times (y) the aggregate amount of all Commitments (determined as of ----- the date of the Assignment and Acceptance with respect to such assignment) by $400,000,000, (iii) Borrower and Administrative Agent shall have consented to such assignment, which consent shall not be unreasonably withheld, provided that no consent shall be required for an assignment to a Bank or an Approved Bank Affiliate and no consent of the Borrower shall be required if, at the time of such assignment, an Event of Default has occurred and is continuing, and (iv) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, and a processing and recordation fee of $3,000. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Bank hereunder and (y) the Bank assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Bank's rights and obligations under this Agreement, such Bank shall cease to be a party hereto; provided that anything contained in any of the Loan Documents to -------- the contrary notwithstanding, if such Bank is the Issuing Bank with respect to any outstanding Letters of Credit or Accepted Time Drafts such Bank shall continue to have all rights and obligations of an Issuing Bank with respect to such Letters of Credit and Accepted Time Drafts until the cancellation or expiration of such Letters of Credit, payment or Accepted Time Drafts and the reimbursement of any amounts drawn thereunder). (c) By executing and delivering an Assignment and Acceptance, the Bank assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any of the 51 Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any of the Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (ii) such assigning Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower, any Designated Subsidiary, or any Guarantor or the performance or observance by Borrower, any Designated Subsidiary, or any Guarantor of any of its obligations under any of the Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee confirms that it has received a copy of the Loan Documents, together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon Administrative Agent, such assigning Bank or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents; (v) such assignee confirms that it is an Eligible Assignee or an Approved Bank Affiliate as applicable; (vi) such assignee appoints and authorizes Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Bank. (d) Administrative Agent shall maintain a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Banks and the Commitment of and principal amount of the Loans owing to, each Bank from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Borrower, the Designated Subsidiaries, the Administrative Agent and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of the Loan Documents. The Register shall be available for inspection by Borrower, the Designated Subsidiaries or any Bank at any reasonable time and from time to time upon reasonable prior notice. (e) Within five days of its receipt of an Assignment and Acceptance executed by an assigning Bank and an assignee representing that it is an Eligible Assignee or an Approved Bank Affiliate, as applicable (together with a processing and recordation fee of $3,000 with respect thereto) and upon consent of Borrower and Administrative Agent, if required pursuant to Section 11.11(b)(iii), Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit J hereto, (1) accept such Assignment and Acceptance and (2) record the information contained therein in the Register. (f) Each Bank may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Loans owing to it, and its participations in Letters of Credit and Accepted Time Drafts); provided, however, that (i) such Bank's obligations under this -------- ------- Agreement (including, without limitation, its Commitment to Borrower hereunder) shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Bank shall remain the holder of any such Loan, Letters of Credit, Accepted Time Drafts or participations therein for all purposes of this Agreement, (iv) Borrower, the Designated Subsidiaries, Administrative Agent and the other 52 Banks shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under the Loan Documents, and (v) no Bank shall grant any participation under which the participant shall have rights to require such Bank to take or omit to take any action hereunder or under the other Loan Documents or approve any amendment to or waiver of this Agreement or the other Loan Documents, except to the extent such amendment or waiver would: (1) extend the Termination Date; or (2) reduce the interest rate, the amount of principal or fees applicable to Loans or the Commitment or the amounts payable to such Bank pursuant to Section 2.16 in which such participant is participating. (g) Any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 11.11, disclose to the assignee or participant or proposed assignee or participant, any information relating to Borrower, the Designated Subsidiaries, or any Guarantor furnished to such Bank by or on behalf of Borrower, the Designated Subsidiaries, or a Guarantor; provided that, prior to any such disclosure, the assignee or -------- participant or proposed assignee or participant shall agree to preserve in accordance with Section 11.15 the confidentiality of any confidential information relating to Borrower, the Designated Subsidiaries, or a Guarantor received by it from such Bank. (h) Notwithstanding any other provision set forth in this Agreement, any Bank may assign any of its rights hereunder to any of its Affiliates and may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Loans owing to it and any promissory note or notes executed and delivered by Borrower or any Designated Subsidiary hereunder and held by such Bank) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. (i) No Bank designated herein as "Syndication Agent," "Documentation Agent," "Senior Managing Agent" shall have any right, power, obligation, liability, or duty under this Agreement other than those applicable to all Banks as such. Without limiting the foregoing, none of the Banks so identified as Syndication Agent, Documentation Agent, Senior Managing Agent shall have or be deemed to have any fiduciary relationship with any Banks. (j) Notwithstanding anything to the contrary contained herein, any Bank (a "Granting Bank") may grant to a special purpose funding vehicle organized under the laws of any state of the United States (an "SPC") the option to fund all or any part of any Loan to the Borrower or Dish Placement that such Granting Bank would otherwise be obligated to fund pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Loan, (ii) if an SPC elects not to exercise such option or otherwise fails to fund all or any part of such Loan, the Granting Bank shall be obligated to fund such Loan pursuant to the terms hereof, and (iii) the Granting Bank shall provide prompt notice to the Borrower and the Administrative Agent of its grant of an option to an SPC to fund all or part of a Loan. The funding of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Bank to the same extent, and as if, such Loan were funded by the Granting Bank. No SPC shall have the right to assign or otherwise transfer its right to fund a Loan to any other Person, other than the Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or payment under this Agreement for which a Bank would otherwise be liable, provided that the Granting Bank shall be fully liable for such indemnity or payment. 53 Notwithstanding anything to the contrary contained in this Agreement, any SPC may disclose on a confidential basis non-public information relating to its funding of Loans to a rating agency, commercial paper dealer or provider of any surety or guarantee to such SPC, provided that the SPC complies with the terms of Section 11.15 hereof as if such SPC were a party to this Agreement. This subsection 11.11(j) may not be amended without the prior written consent or each Granting Bank, all or part of whose Loan is being funded by an SPC at the time of such amendment. 11.12 Obligations Several. The obligations of each Bank under this ------------------- Agreement are several. Neither Administrative Agent nor any Bank shall be liable for the failure of any other Bank to perform its obligations under this Agreement. 11.13 Fees and Expenses. Borrower agrees to pay on demand (a) to ----------------- Administrative Agent all reasonable costs, expenses and attorneys' fees incurred by Administrative Agent in connection with the preparation and administration of this Agreement and any documents including any amendments, waivers, or other modifications and (b) all reasonable costs, expenses and attorneys' fees incurred by Administrative Agent and Banks in connection with the enforcement of this Agreement and any instrument or agreement required hereunder and in connection with any refinancing or restructuring of the Loans in the nature of a "work-out"; provided, however that, in addition to costs of Administrative Agent's in-house counsel, Borrower shall be obligated to pay for the costs of no more than one counsel for Administrative Agent and all Banks (without prejudice to any Bank's right to engage additional counsel at its own cost and expense) unless any Bank shall in Good Faith reasonably determine that there is a conflict of interest that causes it to be reasonably necessary for such Bank to be represented by separate counsel. 11.14 Indemnity. Borrower agrees to indemnify Administrative Agent, --------- each Bank and each of their respective Affiliates and each of their respective directors, officers, agents, advisors, representatives and employees (each, an "Indemnified Party") from and hold each of them harmless against any and all losses, liabilities, claims, damages or reasonable expenses, joint or several, incurred by or asserted or awarded against any of them arising out of or in connection with or relating to any investigation, litigation or proceeding or the preparation of any defense with respect thereto, arising out of or in connection with or relating to any Loan Documents or transactions contemplated thereby or any use made or proposed to be made with the proceeds of the Loans, whether or not such investigation, litigation or proceeding is brought by Borrower, any of its Affiliates, partners, shareholders or creditors, an Indemnified Party or any other person, or an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated thereby are consummated, except to the extent such claim, damage, loss, liability or expense results from such Indemnified Party's gross negligence or willful misconduct or from a material breach of such Indemnified Party's obligations under this Agreement; provided, however, that Borrower shall have no obligation to -------- ------- indemnify or pay for the costs and expenses of more than one counsel for Administrative Agent and all Banks, unless Administrative Agent or any Bank shall in Good Faith reasonably determine that there is a conflict of interest that causes it to be reasonably necessary for Administrative Agent or such Bank to be represented by other counsel. Counsel chosen to represent the Banks or any Bank pursuant to the previous sentence shall be reasonably satisfactory to Borrower. The obligations of Borrower under this Section shall survive the termination of this Agreement. 54 11.15 Confidentiality. Banks, Arranger and Administrative Agent --------------- agree to maintain the confidentiality of all non-public information disclosed by Borrower, any Designated Subsidiary or any Guarantor; provided, however, that -------- ------- any such Person may (a) disclose any confidential information pursuant to a request or order under applicable laws and regulations or pursuant to a subpoena or other legal process, and, in such case such Person shall, unless prohibited by law, give prompt notice to Borrower, such Designated Subsidiary or such Guarantor, as the case may be; (b) disclose any confidential information to bank examiners, bank affiliates, auditors, counsel and other advisors, employees, representatives or agents of such Person; (c) use any confidential information in connection with the management, supervision and enforcement of this Agreement, including the enforcement of such Person's rights under any agreement executed in connection therewith; (d) disclose any confidential information in connection with any litigation or dispute involving any such Person or the Borrower or a Designated Subsidiary and related to this Agreement or to any use of proceeds of the Loans; (e) disclose any confidential information to Banks or any of their Affiliates; and (f) disclose confidential information to prospective assignees and participants and assignees and participants pursuant to Section 11.11; provided, further, that in each of the foregoing cases, such Person shall use its best efforts to ensure that any such disclosure will be made under procedures reasonably calculated to maintain the confidentiality of such information. This Section shall survive termination of the Agreement. 11.16 Right of Set-off. Upon the occurrence and during the ---------------- continuance of any Event of Default, subject to the provisions of Section 3 of Exhibit B hereto, each Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Bank or any of its Affiliate to or for the credit or the account of the Borrower or a Designated Subsidiary against any and all of the obligations of the Borrower or such Designated Subsidiary now or hereafter existing under this Agreement, whether or not such Bank shall have made any demand under this Agreement and although such obligations may be unmatured. Each Bank agrees promptly to notify the Borrower after any such set-off and application made by such Bank, provided that the -------- failure to give such notice shall not affect the validity of such set-off and application. The rights of the Banks under this Section are in addition to other rights and remedies (including, without limitation, other rights of set- off) which the Banks may have. 11.17 Judgment. (a) If for the purposes of obtaining judgment in any -------- court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the respective Bank or the Administrative Agent could purchase Dollars with such other currency at New York, New York, on the Business Day preceding that on which final judgment is given. (b) The obligation of each Obligor in respect of any sum due from it to the Administrative Agent or any Bank hereunder shall, notwithstanding any judgment in a currency other than Dollars, be discharged only to the extent that on the Business Day following receipt by the Administrative Agent or such Bank of any sum adjudged to be so due in such other currency the Administrative Agent or such Bank may in accordance with normal banking procedures purchase Dollars with such other currency; if the Dollars so purchased are less than 55 the sum originally due to the Administrative Agent or such Bank in Dollars, such Obligor agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or such Bank against such loss, and if the Dollars so purchased exceed the sum originally due to the Administrative Agent or such Bank in Dollars, the Administrative Agent or such Bank agrees to remit to the Borrower or the applicable Designated Subsidiary such excess. 11.18 No Immunity. To the extent that the Borrower or any Designated ----------- Subsidiary has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the Borrower and such Designated Subsidiary hereby irrevocably waive such immunity in respect of its obligations under this Agreement and, without limiting the generality of the foregoing, agrees that the waivers set forth in this Section 11.18 shall have the fullest scope permitted under the Foreign Sovereign Immunities Act of 1976 of the United States and are intended to be irrevocable for purposes of such Act. 11.19 Proceedings, Etc. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ----------------- BORROWER OR ANY DESIGNATED SUBSIDIARY ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT EACH OF BORROWER AND EACH DESIGNATED SUBSIDIARY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. Borrower and each Designated Subsidiary hereby designates and appoints CT Corporation System, presently located at 1633 Broadway, New York, N.Y. 10019 as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any suit, action or proceeding in any New York State or United States Federal Court sitting in New York. Borrower and each Designated Subsidiary represents and warrants that such agent has agreed in writing to accept such appointment and that true copies of such acceptance will be furnished to the Administrative Agent prior to the Effective Date. Borrower and each Designated Subsidiary agrees that the failure of such agent to give notice to Borrower or such Designated Subsidiary of any such service shall not impair the validity of such service or of any judgment rendered in any action or proceeding based thereon. Service of all process in any such proceeding in any such court may be made by hand delivery, overnight courier or by registered or certified mail, return receipt requested, to such agent, such service being hereby acknowledged by Borrower and each Designated Subsidiary to be sufficient for personal jurisdiction in any action against Borrower and each Designated Subsidiary in any such court and to be otherwise effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of the Administrative Agent or any Bank to bring proceedings against Borrower and any Designated Subsidiary in the courts of any other jurisdiction. 11.20 Jury Trial Waiver. BORROWER, EACH DESIGNATED SUBSIDIARY, ----------------- ADMINISTRATIVE AGENT AND EACH BANK EACH HEREBY AGREES TO WAIVE ITS 56 RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be all- encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Borrower, each Designated Subsidiary, Administrative Agent and each Bank (i) acknowledges that this waiver is a material inducement for it to enter into a business relationship, that it has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings, and (ii) further warrants and represents that each has reviewed this waiver with its legal counsel and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, EXCEPT BY A WRITTEN INSTRUMENT SPECIFICALLY REFERRING TO THIS SECTION 11.20, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of the date first hereinabove written. 57 BORROWER: SURFIN LTD. By: __________________________ Name: Title: DESIGNATED SUBSIDIARY DISH PLACEMENT SERVICES, LTD. OBLIGORS: By: __________________________ Name: Title: WHITE HOLDING B.V. By: __________________________ Name: Title: S-1 ADMINISTRATIVE AGENT: CITICORP USA, INC. By: __________________________ Name: Title: BANKS: CITIBANK, N.A. By: __________________________ Name: Title: S-2 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (Individually and as Syndication Agent) By: __________________________ Name: Title: S-3 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES (Individually and as Documentation Agent) By: __________________________ Name: Title: By: __________________________ Name: Title: S-4 THE CHASE MANHATTAN BANK (Individually and as a Senior Managing Agent) By: __________________________ Name: Title: S-5 THE FIRST NATIONAL BANK OF CHICAGO (Individually and as a Senior Managing Agent) By: __________________________ Name: Title: S-6 MORGAN GUARANTY TRUST COMPANY OF NEW YORK (Individually and as a Senior Managing Agent) By: ___________________________ Name: Title: S-7 WESTDEUTSCHE LANDESBANK GIROZENTRALE-NEW YORK AND CAYMAN ISLANDS BRANCHES) (Individually and as a Senior Managing Agent) By: __________________________ Name: Title: By: __________________________ Name: Title: S-8 THE BANK OF NEW YORK By: __________________________ Name: Title: S-9 BANQUE NATIONALE DE PARIS By: __________________________ Name: Title: By: __________________________ Name: Title: S-10 PARIBAS By: __________________________ Name: Title: By: __________________________ Name: Title: S-11 MELLON BANK, N.A. By: __________________________ Name: Title: S-12 ISTITUTO BANCARIO SAN PAOLO DI TORINO ISTITUTO MOBILIARE ITALIANO S.p.A. By: __________________________ Name: Title: By: __________________________ Name: Title: S-13 BANK HAPOLIM B.M. By: __________________________ Name: Title: S-14 BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH By: __________________________ Name: Title: By: __________________________ Name: Title: S-15 KBC BANK, N.V. By: __________________________ Name: Title: By: __________________________ Name: Title: S-16 THE MITSUBISHI TRUST AND BANKING CORPORATION, NY BRANCH By: __________________________ Name: Title: S-17 UNI CREDITO ITALIANO S.p.A. By: __________________________ Name: Title: S-18 SCHEDULE 1 BANKS AND COMMITMENTS --------------------- Name of Bank Commitment Percentage - ------------ ----------- ---------- Citibank, N.A. $35,000,000 8.750% Bank of America National Trust and Savings Association 32,000,000 8.000% Deutsche Bank AG New York and Cayman Islands Branches 32,000,000 8.000% The Chase Manhattan Bank 27,500,000 6.875% The First National Bank of Chicago 27,500,000 6.875% Morgan Guaranty Trust Company of New York 27,500,000 6.875% Westdeutsche Landesbank Girozentrale New York and Cayman Islands Branches 27,500,000 6.875% The Bank of New York 23,000,000 5.750% Banque Nationale De Paris 23,000,000 5.750% Paribas 23,000,000 5.750% Mellon Bank, N.A. 23,000,000 5.750% San Paolo IMI Bank 23,000,000 5.750% Bank Hapolim B.M. 15,000,000 3.750% Bayerische Landesbank Girozentrale Cayman Islands Branch 15,000,000 3.750% KBC Bank, N.V. 15,000,000 3.750% The Mitsubishi Trust and Banking Corporation New York Branch 15,000,000 3.750% UniCredito Italiano S.p.A. 15,000,000 3.750% Total: $400,000,000 100.0% Schedule 1-1 EXHIBIT A --------- LOAN REQUEST ------------ TO: Citicorp USA, Inc., as Administrative Agent for Banks FROM: [SurFin Ltd.] [Dish Placement Services, Ltd.] [White Holding B.V.] DATE: RE: SurFin Ltd. -- Credit Agreement Ladies and Gentlemen: 1. We refer to the Credit Agreement dated as of June 3, 1999 and made among SurFin Ltd., the Designated Subsidiaries (as defined therein), Citicorp USA, Inc., as Administrative Agent, Bank of America National Trust and Savings Association, as Syndication Agent, Deutsche Bank, AG, New York and Cayman Islands Branches, as Documentation Agent and Chase Manhattan Bank, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York and Westdeutsche Landesbank Girozentrale-New York and Cayman Island Branches, as Senior Managing Agents, and the certain financial institutions named therein as Banks (the "Agreement"). Terms defined in the Agreement shall have the same meaning herein. 2. We hereby request that a [Reference Rate Loan] [Eurodollar Loan] be made as follows: (i) Name of Obligor to which Loan is to be made: [Specify either SurFin Ltd., Dish Placement Services, Ltd. or White Holding B.V.] (ii) Principal Amount: (iii) Borrowing Date: (iv) Interest Period (if a Eurodollar Loan): 3. For the purposes of inducing the Banks to make the Loan requested herein, we confirm that, pursuant to Section 5.2 of the Agreement, as of the date hereof: (i) the representations and warranties set out in Section 6 of the Agreement are true and correct in all material respects; (ii) the most current financial statements of Borrower and its Subsidiaries present fairly the financial position and results of operation and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such statements relate as of the date of the last such audited financial A-1 statements (subject, in the case of unaudited financial statements, to year end adjustments) and there has been no Material Change since the date of the last such audited financial statements; and (iii) no Event of Default or Unmatured Event of Default has occurred and is continuing. [SurFin Ltd.] [Dish Placement Services, Ltd.] [White Holding B.V.] By:__________________________ Title:_______________________ A-2 EXHIBIT B RELATIONS AMONG THE BANKS AND ADMINISTRATIVE AGENT -------------------------------------------------- 1. Administration of the Credit. Payment of interest and principal ---------------------------- on the Loans and the Facility Fees and all other amounts payable by the Obligors hereunder shall be made by the Obligors in immediately available funds, directly to each Bank in the case of amounts payable under Sections 3.1, 3.2 and 3.3 and, in all other cases, to Administrative Agent, and Administrative Agent shall promptly distribute to the other Banks in immediately available funds their shares of principal, interest and fees and to each Bank as provided herein such other amounts as paid by Borrower. 2. Pro Rata Distribution. All Facility Fees will be divided among --------------------- the Banks in accordance with their Percentage, and interest and principal payments on each Loan will be divided pro rata among Banks in accordance with their Percentage. 3. Right of Set-off. Any Bank which shall receive payment of or on ---------------- account of all or part of its share of the Loans or amounts due in respect of Participated Letters of Credit or Accepted Time Drafts with respect to Participated Letters of Credit through the exercise of any right of set-off, counterclaim, or banker's lien, or otherwise in a greater proportion than the proportionate amount of principal, interest or amounts in respect of Participated Letters of Credit and Accepted Time Drafts with respect to Participated Letters of Credit due it under this Agreement immediately prior to such payment shall purchase a ratable proportion of the portions of the Loans or participations in the applicable Participated Letters of Credit and Accepted Time Drafts with respect to Participated Letters of Credit held by the other Banks so that all recoveries of principal, interest and amounts due in respect of Participated Letters of Credit and Accepted Time Drafts with respect to Participated Letters of Credit shall be shared by the Banks in accordance with their pro rata interests therein. 4. Notice of Event of Default. Upon receipt by Administrative Agent -------------------------- from an Obligor of any communication calling for an action on the part of Banks, or upon notice to Administrative Agent of an Event of Default, it will in turn promptly inform the other Banks in writing of the nature of such communication or of the Event of Default, as the case may be. 5. Actions by Administrative Agent. Each Bank hereby appoints and ------------------------------- authorizes CUSA to act as Administrative Agent under this Agreement and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of the Loans and other amounts owing hereunder), the Administrative Agent shall be required to exercise any discretion to take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Banks, and such instructions shall be binding upon all Banks; provided, however, that the -------- ------- Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to any of the Loan Documents or B-1 applicable law. Upon any occasion requiring or permitting an approval, consent, election or other action on the part of Banks, action shall be taken by Administrative Agent for and on behalf or for the benefit of all Banks upon the direction of the required number of Banks and the Administrative Agent, if applicable, as set forth in Section 11.1 of the Agreement. 6. Several Liability of Banks. The obligation of each Bank hereunder -------------------------- is several, and the failure of one Bank to perform hereunder shall in no way relieve the other Banks from performance; provided that no Bank shall be responsible for any other Bank's failure to perform its obligations under the Agreement. 7. Liability of Administrative Agent. Administrative Agent shall not --------------------------------- be liable or answerable for anything whatsoever in connection with this Agreement except for its willful misconduct or gross negligence, and Administrative Agent shall have no duties or obligations other than as provided herein. Administrative Agent shall be entitled to rely on any opinion of counsel (including counsel for the Obligors) in relation to this Agreement, and upon statements and communications received from the Obligors, or from any other person, believed by it to be authentic, and shall not be liable for any action taken or omitted in Good Faith on such reliance. 8. Indemnification of Administrative Agent. Each Bank agrees to --------------------------------------- indemnify Administrative Agent (to the extent not reimbursed by Borrower and without limiting the obligation of Borrower to do so), ratably according to its Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by Administrative Agent under this Agreement except for Administrative Agent's gross negligence or willful misconduct. The obligations of the Banks under this Section 8 shall survive termination of the Agreement. Without limitation of the foregoing, each Bank agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrower. 9. Rights of Administrative Agent as Bank. With respect to their -------------------------------------- respective obligations to lend and to issue Letters of Credit under this Agreement, the Loans made, the Letters of Credit issued and Accepted Time Drafts created, CUSA and Citibank, as the Designated Issuer for CUSA, shall have the same rights and powers hereunder as any other Bank and may exercise the same as though CUSA were not Administrative Agent; and the term "Banks" shall include CUSA in its individual capacity. CUSA and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, trust, investment banking or other business with any Obligor or any Guarantor as if it were not Administrative Agent. B-2 10. Assignment by Bank of its Obligations. Administrative Agent may ------------------------------------- deem and treat a Bank party to this Agreement as the owner of such Bank's portion of the Loans for all purposes hereof unless and until a written notice of the assignment or transfer of such Bank's obligations otherwise permitted under the Agreement executed by such Bank shall have been received by Administrative Agent, together with Borrower's consent to such assignment or transfer and such other documentation from such Bank and its assignee or transferee as Administrative Agent may reasonably request, as provided in Section 11.11 of this Agreement. 11. Representations by Banks. Neither Administrative Agent nor any ------------------------ Bank has made or makes to any other Bank any representation, and neither Administrative Agent nor any Bank assumes any responsibility, for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement or in respect of the legality, validity, enforceability, genuineness, sufficiency, execution, construction or enforcement of this Agreement or any other instrument or agreement executed by any Obligor or by any other person or entity. 12. Independent Investigation by Banks. Each Bank has made and shall ---------------------------------- continue to make its own independent investigation of the financial condition and affairs of Borrower in connection with the making and the continuance of the Loans and the issuance of Letters of Credit and has made and covenants that it shall continue to make its own appraisal of the credit worthiness of the Obligors. Each Bank agrees Administrative Agent has no duty or responsibility, either initially or on a continuing basis, to provide any Bank with any credit or other information with respect to any Obligor, whether coming into its possession before the making of the Loans or at any time or times thereafter or to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower, in each case except as expressly provided in this Agreement. 13. Successor Administrative Agent. Administrative Agent shall have ------------------------------ the right, at any time, to resign as Administrative Agent for the Banks hereunder. Such resignation shall not be effective until a successor agent chosen by Majority Banks, and accepted by Borrower, shall accept appointment as agent for the Banks hereunder. If no successor Administrative Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment, within 30 days after the retiring Administrative Agent has given notice of resignation, the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent reasonably acceptable to Borrower, which successor Administrative Agent shall be a commercial bank organized under the laws of the United States of America or a State thereof having a combined capital and surplus of at least $100,000,000. Upon the acceptance by the successor Administrative Agent of its appointment hereunder, the successor Administrative Agent shall succeed to and become vested with all the rights and obligations of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its obligations under this Agreement. The provisions of this Article shall inure to the benefit of the retiring Administrative Agent as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Exhibit B and B-3 Section 11.13 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. B-4 EXHIBIT C LENDING OFFICES OF BANKS AND ADDRESSES FOR NOTICES -------------------------------------------------- SurFin Ltd. Notice Address: SurFin Ltd. c/o SG Hambros West Bay Street P.O. Box N7788 Nassau, Bahamas Attn: James Hoar With a copy to: SurFin Ltd. 2400 E. Commercial Blvd., Suite 440 Ft. Lauderdale, FL 33308 Attn: Patrick Fournie Dish Placement Services Ltd. c/o SG Hambros West Bay Street P.O. Box N7788 Nassau, Bahamas Attn: James Hoar With a copy to: Dish Placement Services Ltd. 2400 E. Commercial Blvd., Suite 440 Ft. Lauderdale, FL 33308 Attn: Patrick Fournie White Holding B.V. c/o TMF Management B.V. Locatellikade 1 Parmassustoren 1076 AZ Amsterdam The Netherlands Attn: Maria C. van der Sluijs-Plantz C-1 With a copy to: White Holding B.V. 2400 E. Commercial Blvd., Suite 440 Ft. Lauderdale, FL 33308 Attn: Patrick Fournie Citibank, N.A. Domestic Lending office: c/o Citicorp USA, Inc. Citibank Agency Services 2 Penns Way, Suite 2000 New Castle, Delaware 19720 Attn: Janet Wallace Eurodollar Lending office: c/o Citicorp USA, Inc. Citibank Agency Services 2 Penns Way, Suite 2000 New Castle, Delaware 19720 Attn: Janet Wallace Notice Address: c/o Citicorp USA, Inc. 787 West Fifth Street Los Angeles, CA 90071 Attn: Janet Wallace Attn: Walter Larsen J. Greg Davis Jeff Knowles C-2 Bank of America National Trust and Savings Association Domestic/Eurodollar Lending Office: Bank of America 1850 Gateway Blvd, Unit #5693 Concord, CA 94520 Notice Office: Bank of America 555 S. Flower Street, 11th Floor Los Angeles, CA 90071 Attn: Dianne Purst Allen Tel: (213) 228-2435 Fax: (213) 623-1959 Deutsche Bank AG New York and/or Cayman Islands Branches Domestic Lending Office: Deutsche Bank AG New York Branch 31 West 52nd Street New York, NY 10019 Eurodollar Lending Office: Deutsche Bank AG Cayman Islands Branch c/o Deutsche Bank AG New York Branch 31 West 52nd Street New York, NY 10019 Notice Address: Deutsche Bank AG New York Branch and/or Cayman Island Branches 31 West 52nd Street New York, NY 10019 Attn: Joel Makowsky Tel: (212) 469-7896 Fax: (212) 469-8212 C-3 The Chase Manhattan Bank Domestic/Eurodollar Lending Office: The Chase Manhattan Bank 140 East 45th Street, 29th Floor New York, NY 10017-2070 Notice Address: The Chase Manhattan Bank Global Media & Telecommunications Group 270 Park Avenue, 37th Floor New York, NY 10017 Attn: Tracey Ewing, Vice President Tel: (212) 270-8916 Fax: (212) 270-4164 The First National Bank of Chicago Domestic/Eurodollar Lending Office: The First National Bank of Chicago One First National Plaza 10th Floor, Suite 0634 Chicago, IL 60670 Attn: Sharon Bosch Notice Address: The First National Bank of Chicago 777 S. Figueroa Street, 4th Fl. Los Angeles, CA 90017 Attn: Mark Isley Tel: (213) 683-4964 Fax: (213) 683-4949 C-4 Morgan Guaranty Trust Company of New York Domestic Lending Office: Morgan Guaranty Trust Company of New York 60 Wall Street Branch c/o J.P. Morgan Services Inc. 500 Stanton-Christiana Road Loan Operations - 3rd Floor Eurodollar Lending Office: Morgan Guaranty Trust Company of New York Nassau, Bahamas Office c/o J.P. Morgan Services Inc. Euro-Loan Servicing Unit 500 Stanton-Christiana Road Newark, DE 19713 Notice Address: Morgan Guaranty Trust Company of New York 60 Wall Street New York, NY 10260 Attn: Robert Osieski Tel: (212) 648-0342 Fax: (212) 648-5939 Westdeutsche Landesbank Girozentrale Domestic/Eurodollar Lending Office: Westdeutsche Landesbank Girozentrale New York Branch 1211 Avenue of the Americas 23rd Floor New York, NY 10061 Notice Address: Westdeutsche Landesbank Girozentrale 633 West 5th Street, Suite 6750 Los Angeles, CA 90071 Attn: Jonathan Kim Tel: (213) 623-1517 ex. 14 Fax: (213) 623-4706 C-5 The Bank of New York Domestic/Eurodollar Lending Office: The Bank of New York One Wall Street, 22nd Floor New York, NY 10286 Attn: Dawn Hertling Notice Address: The Bank of New York 10990 Wilshire Boulevard, Suite 1125 Los Angeles, CA 90024 Attn: Jonathan Rollins Tel: (310) 996-8658 Fax: (310) 996-8667 Banque Nationale de Paris Domestic/Eurodollar Lending Office: Banque Nationale de Paris 725 South Figueroa Street, Suite 2090 Los Angeles, CA 90017 Notice Address: Banque Nationale de Paris 725 South Figueroa Street, Suite 2090 Los Angeles, CA 90017 Attn: Janice Ho Tel: (213) 488-9120 Fax: (213) 488-6602 Paribas Domestic/Eurodollar Lending Office: Paribas 2029 Century Park East Suite 3900 Los Angeles, CA 90067 Attn: Shirley Williams Notice Address: Paribas 2029 Century Park East Suite 3900 Los Angeles, CA 90067 Attn: Tom Brandt Tel: (310) 551-7380 Fax: (310) 556-3762 C-6 Mellon Bank, N.A. Domestic/Eurodollar Lending Office: Mellon Bank, N.A. Three Mellon Bank, Rm 2300 Pittsburgh, PA 15259 Attn: John Kyle Notice Address: Mellon Bank, N.A. 400 S. Hope Street, Fifth Floor Los Angeles, CA 90071 Attn: Lawrence Ivey Tel: (213) 553-9543 Fax: (213) 629-0492 San Paolo IMI Bank Domestic/Eurodollar Lending Office: San Paolo IMI Bank 245 Park Avenue New York, NY 10167 Attn: Carmela Romanello-Schaden Notice Address: San Paolo IMI Bank 245 Park Avenue New York, NY 10167 Attn: Carmela Romanello-Schaden Tel: (212) 692-3126 Fax: (212) 692-3178 Bank Hapolim B.M. Domestic/Eurodollar Lending Office: Bank Hapoalim B.M. 1177 6th Avenue, 12th Fl. New York, NY 10036 Attn: Marc Bosc Notice Address: Bank Hapoalim B.M. 1177 6th Avenue, 12th Fl. New York, NY 10036 Attn: Marc Bosc Tel: (212) 782-2181 Fax: (212) 782-2187 C-7 Bayerische Landesbank Girozentrale Domestic/Eurodollar Lending Office: Bayerische Landesbank Girozentrale Cayman Island Branch 560 Lexington Avenue, 17th Fl. New York, NY 10022 Attn: Jim Boyle Notice Address: Bayerische Landesbank Girozentrale Cayman Island Branch 560 Lexington Avenue, 22nd Fl. New York, NY 10022 Attn: Jim Boyle Tel: (212) 310-9817 Fax: (212) 310-9868 KBC Bank, N.V. Domestic/Eurodollar Lending Office: KBC Bank, N.V. 125 West 55th Street, 10th Floor New York, NY 10019 Attn: Christine Park Notice Address: KBC Bank, N.V. 125 West 55th Street, 10th Floor New York, NY 10019 Attn: Michael Curran Tel: (212) 541-0708 Fax: (212) 956-5580 The Mitsubishi Trust and Banking Corporation Domestic/Eurodollar Lending Office: The Mitsubishi Trust and Banking Corporation, New York Branch 520 Madison Avenue New York, NY 10022 Notice Address: The Mitsubishi Trust and Banking Corporation, New York Branch 520 Madison Avenue New York, NY 10022 Attn: Scott Paige Tel: (212) 897-8216 Fax: (212) 644-6825 C-8 UniCredito Italiano S.p.A Domestic Lending Office: UniCredito Italiano, New York Branch 375 Park Avenue New York, NY 10152 Attn: Gianfranco Bisagni Eurodollar Lending Office: UniCredito Italiano, Grand Cayman Branch c/o UniCredito Italiano, NY Branch 375 Park Avenue New York, NY 10152 Notice Address: UniCredito Italiano, New York Branch 375 Park Avenue New York, NY 10152 Attn: Gianfranco Bisagni Tel: (212) 546-9623 Fax: (212) 546-9675 C-9 EXHIBIT D [FORM OF HUGHES GUARANTY] GUARANTY -------- THIS GUARANTY, dated as of June 3, 1999, is made by HUGHES ELECTRONICS CORPORATION, a Delaware corporation (the "Guarantor"), in favor of CITICORP USA, --------- INC., a Delaware corporation, as Administrative Agent for and representative of the financial institutions party to the Credit Agreement defined below (together with its successors and permitted assignees in such capacity, the "Administrative Agent"). -------------------- RECITALS -------- A. The Guarantor is an owner, directly or indirectly, of approximately 59.1% of the equity of SurFin Ltd., an international business company incorporated under the laws of the Bahamas (the "Borrower"). Pursuant -------- to that certain Credit Agreement of even date herewith (as it may be amended, supplemented or otherwise modified from time to time the "Credit Agreement") ---------------- among the Borrower, the Designated Subsidiaries (as defined in the Credit Agreement), the Banks party thereto and the Administrative Agent, as agent for the Banks, the Banks have agreed to make available a $400,000,000 revolving credit facility to the Borrower and the Designated Subsidiaries (each an "Obligor" and collectively the "Obligors"). The Borrower has advised the Guarantor, the Administrative Agent and the Banks that the Obligors intend to use the proceeds of the such revolving credit facility to finance the development in Mexico and various countries in the Caribbean, Central America and South America of a satellite television service. B. The Banks are willing to enter into the Credit Agreement on the condition that the Guarantor guarantees, jointly and severally with the other owners (or their affiliates) of the Borrower, the performance and payment of the Borrower's obligations under the Credit Agreement pursuant to the terms of this Guaranty. NOW, THEREFORE, in consideration of the foregoing promises and other good and valuable consideration, receipt and sufficiency of which are acknowledged, the Guarantor hereby agrees as follows: 1. Definitions. Capitalized terms not otherwise defined in this ----------- Guaranty shall have the meanings given them in the Credit Agreement. 2. Guaranty. -------- (a) The Guarantor hereby irrevocably and unconditionally, guarantees the punctual payment when due of all payment obligations of the Obligors under the Credit Agreement, up to a maximum amount as to principal of US$400,000,000 plus all interest, fees, indemnities and other amounts payable under the Credit Agreement, including amounts that D-1 would become due but for the operation of the automatic stay under Section 362(c) of the United States Bankruptcy Code or similar provisions under the laws of the Bahamas, The Netherlands or other applicable law (collectively, the "Guaranteed Obligations"). In the event that any of the Guaranteed Obligations ---------------------- shall not be paid when due within any specified grace period provided for in the Credit Agreement, the Guarantor agrees to pay such Guaranteed Obligations within ten Business Days after the giving by the Administrative Agent to the Guarantor and the Process Agent named in Section 15 hereof of written notice (a "Demand") demanding payment by the Guarantor, provided that in the event any such payment -------- is required to be made by the Guarantor hereunder, the Guarantor may cause such obligation or liability to be paid on its behalf by any corporation affiliated with it, including the Obligors, provided that the Guarantor shall nevertheless be unconditionally obligated to pay such obligation or liability if such affiliate, including the Obligors, shall fail timely to pay such obligation or liability. (b) This Guaranty is a guarantee of payment and not of performance or collection. The obligation of the Guarantor hereunder shall be independent of the obligation of any other Guarantor (as such term is defined in the Credit Agreement), all such obligations being joint and several. (c) The Guarantor shall be subrogated to all rights of the Banks against the Obligors in respect of any amounts paid by the Guarantor pursuant to the provisions of this Guaranty; provided, however, that the Guarantor shall not -------- ------- be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all the Guaranteed Obligations shall have been irrevocably and indefeasibly paid in full and no Guaranteed Obligations may arise in the future. 3. Guaranty Absolute. The liability of the Guarantor under this ----------------- Guaranty with respect to each and all of the Guaranteed Obligations shall be irrevocable and shall be absolute and unconditional irrespective of, and shall not be released, discharged or in any way affected by, any circumstance, condition or matter (whether or not the Guarantor or any Obligor shall have any knowledge or notice thereof), including, without limitation: (a) any amendment, waiver, extension or renewal of, or any consent to departure from, the Credit Agreement, including, without limitation, any waiver or consent involving a change in the time, manner or place of payment of all or any of the Guaranteed Obligations; (b) any exchange, release or nonperfection of any collateral, or any release or amendment or waiver of or consent or departure from any other guaranty or security agreement, for all or any of the Guaranteed Obligations; (c) any extension of the time for payment by any Obligor or any other person of any Guaranteed Obligation under the Credit Agreement or any other document related thereto; D-2 (d) any failure, omission or delay by the Administrative Agent or the Banks to enforce, assert or exercise any right, power or remedy conferred on or available to it; (e) any inability, lack of authority or legal disability of any Obligor to perform any agreement, covenant, term or condition contained in the Credit Agreement for any reason (whether or not the Guarantor shall have any knowledge or notice thereof), including, without limitation, provisions of any law or regulation of any jurisdiction (including the Bahamas and The Netherlands) purporting to prohibit or excuse payment or performance by any Obligor of its obligations under the Credit Agreement; (f) the voluntary or involuntary liquidation, dissolution, sale of assets, marshalling of assets and liabilities, receivership, conservatorship, custodianship, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of or similar proceeding affecting any Obligor, the Guarantor, the Administrative Agent, the Banks or any other person or any of their respective properties or creditors, or any action taken by any trustee or receiver or by any court in any such proceeding; (g) any merger or consolidation of any Obligor into or with any person or any sale, lease or transfer of any of the assets of any Obligor to any other person; (h) any change in corporate relationship between any Obligor and the Guarantor or any termination of any such relationship; (i) any counterclaim, set-off, deduction or defense any Obligor, the Guarantor or any other Person may have against the Administrative Agent, the Banks or any other person other than indefeasible payment in full; and (j) any other circumstance whatsoever, whether similar or dissimilar to the foregoing, which might otherwise constitute a legal or equitable defense available to, or a discharge of, the Guarantor in respect of this Guaranty. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment by any Obligor, the Guarantor or any other person of any of the Guaranteed Obligations owed hereunder is rescinded or must otherwise be returned by the Administrative Agent or the Banks upon the insolvency, bankruptcy or reorganization of any Obligor, the Guarantor or any other person, all as though such payment had not been made. If the payment of any sum required to be made by any Obligor under the Credit Agreement shall at any time be prevented by reason of a case or proceeding under bankruptcy, insolvency or other similar law, the Guarantor agrees that, for purposes of this Guaranty and its obligations hereunder, such sum shall be deemed to be payable in accordance with the terms of the Credit Agreement, and the Guarantor shall pay such sum and any other amounts guaranteed hereunder. D-3 4. Waiver by the Guarantor. The Guarantor hereby unconditionally ----------------------- waives, to the greatest extent permitted by applicable law, (i) any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by the Banks upon this Guaranty, or acceptance of this Guaranty, and the Guaranteed Obligations, (ii) any requirement that the Banks exhaust any right or take any action against any Obligor, any other guarantor or any other person or any collateral, (iii) any and all rights which the Guarantor may have or which at any time hereafter may be conferred upon it, by statute (including but not limited to any statute of limitations), regulation or otherwise, to terminate or cancel this Guaranty, (iv) all notices which may be required by statute, rule of law or otherwise to preserve any rights against the Guarantor hereunder, including, without limitation, any demand, presentment, protest, proof or notice of nonpayment of any amounts payable under or in respect of the Credit Agreement, and notice of any failure on the part of any Obligor to perform and comply with any term or condition of the Credit Agreement, (v) any rights to the enforcement, assertion or exercise of any right, remedy, power or privilege under or in respect of the Credit Agreement, (vi) any requirement of diligence and (vii) notice of acceptance of this Guaranty. The Administrative Agent shall have the right to bring suit directly against the Guarantor with respect to the Guaranteed Obligations, either prior to or concurrently with any lawsuit against, or without bringing suit against, any Obligor. 5. Continuing Guaranty. This Guaranty is a continuing guaranty and ------------------- shall (a) be irrevocable and remain in full force and effect in accordance with the terms hereof until all of the Guaranteed Obligations, including those which might arise at a later date, have been paid in full and are not subject to rescission or return, (b) be binding upon the Guarantor and its successors and assigns, and (c) inure to the benefit of and be enforceable by the successors, transferees and assigns of the Administrative Agent and the Banks permitted by the Credit Agreement. The Guarantor agrees that in the discharge of its obligations hereunder no judgment, order, or exhaustion need be obtained, and no action, suit or proceeding need be brought and no other remedies need be exhausted against any Obligor or any other person for performance by the Guarantor of its obligations hereunder 6. Representations. The Guarantor represents and warrants to the --------------- Administrative Agent as follows: (a) The Guarantor is a corporation validly existing and in good standing under the laws of its jurisdiction of incorporation and the execution, delivery and performance of this Guaranty are within its corporate powers and are not in contravention of the terms of its charter or bylaws. (b) The execution, delivery and performance of this Guaranty have been duly authorized by all requisite corporate action of the Guarantor, and this Guaranty has been duly executed and delivered by the Guarantor and constitutes its legal, valid and binding obligation and is enforceable against the Guarantor in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other laws now or hereafter affecting the rights of creditors. D-4 (c) The execution, delivery and performance of this Guaranty will not violate or conflict with (i) any provision of any law or regulation binding on the Guarantor, or any order, judgment, award or decree of any court, arbitrator or governmental authority binding on the Guarantor, or any securities issued by the Guarantor, or any mortgage, indenture, lease, contract or other agreement, instrument or undertaking to which the Guarantor is a party or by which the Guarantor or any of its assets may be bound, the violation of which would have a material adverse effect on the business, operations, assets or financial condition of the Guarantor, or (ii) the certificate of incorporation or bylaws of the Guarantor, and will not result in, or require, the creation or imposition of any Lien on any of its property, assets or revenues pursuant to the provisions of any such mortgage, indenture, lease, contract or other agreement, instrument or undertaking. 7. Financial Information; Access. ----------------------------- (a) So long as the Credit Agreement remains in effect the Guarantor agrees (i) to provide to the Administrative Agent a copy of all such reports and financial information pertaining to the Guarantor as shall be filed by or on behalf of the Guarantor with the Securities and Exchange Commission, promptly after the same are so filed, and (ii) to provide to the Administrative Agent such other financial information as the Administrative Agent may reasonably request. (b) The Guarantor further agrees to permit the Administrative Agent reasonable access, upon prior notice and at reasonable times during normal business hours, to the Guarantor's books, records, and financial or accounting personnel, to the extent relevant to this Guaranty or the Credit Agreement; provided, however, that such access shall be in compliance with security and confidentiality requirements of applicable governmental authorities and the Guarantor's corporate policies relating to confidential information 8. Merger, Consolidation or Other Transfers. ---------------------------------------- (a) The Guarantor shall not consolidate with or merge into any other person or convey, transfer or lease all or substantially all of its assets as an entirety to any person unless: (i) such successor entity or such person to whom the conveyance, transfer or lease is made (such successor entity, together with any successor entity described in Section 8(b) below, being referred to herein as a "Successor --------- Guarantor") shall expressly assume in writing by instrument or instruments - --------- enforceable against it reasonably satisfactory in form and substance to the Administrative Agent, the due and punctual payment of all obligations of the Guarantor under this Guaranty with the same effect as if such Successor Guarantor had originally been named a Guarantor herein or had been a party hereto; (ii) immediately after giving effect to such transaction, no Event of Default shall exist and this Guaranty shall be in full force and effect; and D-5 (iii) the Successor Guarantor shall have delivered to the Administrative Agent an opinion of counsel in scope and substance reasonably satisfactory to it stating that such consolidation, merger, conveyance, transfer or lease and the assumption agreement required by clause (i) above comply with this Section 8. (b) Except as provided in subsection 8(a) above, the Guarantor shall not assign or delegate its obligations under this Guaranty; provided that -------- the Guarantor may assign and delegate its obligations under this Guaranty to a successor entity as a part of the transfer of all or substantially all of the assets of its Direct TV International Division to such successor entity (including, without limitation, a Subsidiary of the Guarantor) as an entirety as long as all of the following conditions have been satisfied: (i) such assignment and delegation shall have been approved by the Administrative Agent and all of the Banks, which consent shall not be unreasonably withheld; (ii) the conditions in clauses (i) through (iii) of subsection 8(a) have been satisfied with respect to such assignment and delegation; and (iii) the Successor Guarantor to whom such transfer, delegation and assignment is made shall have a credit rating on its senior unsecured debt, as determined by each of Moody's Investors Service, Inc. (or any successor thereto) and Standard & Poor's Ratings Group (or any successor thereto), at least as favorable as the unsecured debt of the Guarantor at such date after giving effect to such transfer, assignment and delegation, and the rating of such Successor Guarantor's senior unsecured debt shall not be under review with negative implications by such rating agency at such date after giving effect to such transfer, assignment and delegation. (c) Upon any such consolidation or merger, conveyance, transfer or lease in accordance with the provisions of (a) or (b) above, the successor formed by such consolidation or into which the Guarantor is merged, or the person to which such conveyance, transfer or lease is made, shall succeed to, and be substituted for, the Guarantor as a Guarantor, with the same effect as if such Successor Guarantor had been originally named as a Guarantor. 9. Taxes. All payments or reimbursements under this Guaranty and any ----- instrument or agreement required hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any and all present and future Taxes (as defined below). The Guarantor agrees to cause all such Taxes to be paid on behalf of any Bank or Administrative Agent directly to the appropriate governmental authority. If the Guarantor is legally prohibited from complying with this Section, payments due to such Bank or Administrative Agent under this Guaranty and any instrument or agreement required hereunder shall be increased so that, after provisions for Taxes and all Taxes on such increase, the amounts received by such Bank or Administrative Agent will be equal to the amounts required under this Guaranty and any instrument or agreement required hereunder as if no Taxes were due on such payments. The Guarantor shall indemnify each Bank and Administrative Agent for the full amount of Taxes payable by such Bank or Administrative Agent and any liabilities (including penalties, interest and expenses) arising from such Taxes within thirty (30) days from any written D-6 demand by such Bank. The Guarantor shall provide evidence that all applicable Taxes have been paid to the appropriate taxing authorities by delivering to Administrative Agent official tax receipts or notarized copies or other evidence thereof satisfactory to Administrative Agent, within ninety (90) days after the due date for such Tax payment. Such Bank will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such payment or reimbursement and will not be otherwise disadvantageous to such Bank in the sole discretion of such Bank. For purposes of this Section 9, "Tax" and "Taxes" means (i) all taxes, levies, imposts, duties, fees or other charges of whatsoever nature however imposed by any country or any subdivision or authority of or in that country in any way connected with the Credit Agreement or this Guaranty or any instrument or agreement required hereunder, and all interest, penalties or similar liabilities with respect thereto, except such taxes as are imposed on or measured by the Administrative Agent's or any Bank's net income or capital and franchise taxes, by the country or any subdivision or authority of or in that country in which the Administrative Agent's or such Bank's principal office or actual Lending Office is located, and (ii) any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Guaranty. 10. Amendments, Etc. No amendment or waiver of any provision of this ---------------- Guaranty shall in any event be effective with respect to the Administrative Agent unless the same shall be in writing and signed by the Administrative Agent. 11. No Waiver; Remedies. No failure on the part of the ------------------- Administrative Agent to exercise, and no delay in its exercise of, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder by the Administrative Agent preclude any other or further exercise thereof or the exercise of any other right by it. Subject to Section 11.1 of the Credit Agreement, the Administrative Agent may specifically waive any breach of this Guaranty by the Guarantor; provided that -------- no such waiver shall be effective or binding unless in writing, and that no such waiver shall constitute a continuing waiver of similar or other breaches. 12. Separability of This Guaranty. In case any term or provision of ----------------------------- this Guaranty or any application hereof to any circumstance shall, in any circumstances or jurisdiction and to any extent, be invalid, illegal or unenforceable, such term or provision shall be ineffective as to such jurisdiction to the extent of such invalidity, illegality or unenforceability without invalidating or rendering unenforceable any remaining terms and provisions hereof or the application of such term or provision to circumstances or jurisdictions other than those as to which it is held invalid, illegal or unenforceable. To the extent permitted by applicable law, the Guarantor hereby waives any provision of law that renders any term or provision hereof invalid, illegal or unenforceable in any respect. 13. Headings. The headings contained in this Guaranty are for -------- convenience of reference only and shall not modify, define or limit any of the terms or provisions hereof. D-7 14. Governing Law. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF ------------- THE GUARANTOR, THE ADMINISTRATIVE AGENT AND THE BANKS HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5- 1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 15. Proceedings, Etc. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE ----------------- GUARANTOR ARISING OUT OF OR RELATING TO THIS GUARANTY MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY THE GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS GUARANTY. The Guarantor hereby designates and appoints CT Corporation System, presently located at 1633 Broadway, New York, N.Y. 10019 as its authorized agent (the "Process Agent") to accept and acknowledge on its behalf service of any and all process which may be served in any suit, action or proceeding in any New York State or United States Federal Court sitting in New York, and to receive and acknowledge on behalf of the Guarantor any Demands made by the Administrative Agent pursuant to Section 2 hereof. The Guarantor represents and warrants that the Process Agent has agreed in writing to accept such appointment and that true copies of such acceptance will be furnished to the Administrative Agent prior to the Effective Date under the Credit Agreement. The Guarantor agrees that the failure of the Process Agent to give notice to the Guarantor of any such service or Demand shall not impair the validity of such service or Demand or of any judgment rendered in any action or proceeding based thereon. Service of all process in any such proceeding in any such court and of any Demand under Section 2 hereof may be made by hand delivery, courier service or by registered or certified mail, return receipt requested, to the Process Agent, such service being hereby acknowledged by the Guarantor to be sufficient for personal jurisdiction in any action against the Guarantor in any such court and to be otherwise effective and binding service or demand in every respect. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of the Administrative Agent or any Bank to bring proceedings against the Guarantor in the courts of any other jurisdiction. 16. Jury Trial Waiver. THE GUARANTOR AND, BY ITS ACCEPTANCE OF THE ----------------- BENEFITS HEREOF, THE ADMINISTRATIVE AGENT EACH HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. The scope of this waiver is intended to be all- encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims and all other common law and statutory claims. The Guarantor and, by its acceptance of the benefits hereof, the Administrative Agent each (i) acknowledges that this waiver is a material inducement for the Guarantor and Administrative Agent to enter into a business relationship, that the Guarantor and Administrative Agent have D-8 already relied on this waiver in entering into this Guaranty or accepting the benefits thereof, as the case may be, and that each will continue to rely on this waiver in their related future dealings, and (ii) further warrants and represents that each has reviewed this waiver with its legal counsel and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, EXCEPT BY A WRITTEN INSTRUMENT SPECIFICALLY REFERRING TO THIS SECTION 16, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS GUARANTY. In the event of litigation, this Guaranty may be filed as a written consent to a trial by the court. 17. Counterparts. This Guaranty may be executed in any number of ------------ counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original for all purposes; but all such counterparts together shall constitute but one and the same instrument. This Guaranty shall become effective as to the Guarantor upon the execution of a counterpart hereof by the Guarantor and receipt by Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. 18. Cost and Attorneys Fees. The Guarantor agrees to pay, or cause ----------------------- to be paid, in addition to the Guaranteed Obligations, on demand, and to save the Administrative Agent and the Banks harmless against liability for, any and all costs and expenses (including reasonable fees and disbursements of counsel) incurred or expended by Administrative Agent or any Bank in connection with the enforcement of or preservation of any rights under this Guaranty. 19. Effect of Obligor's Bankruptcy. The Guarantor acknowledges and ------------------------------ agrees that any interest on any portion of the Guaranteed Obligations which accrues after the commencement of any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of any Obligor (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Guaranteed Obligations if said proceeding had not been commenced) shall be included in the Guaranteed Obligations because it is the intention of the Guarantor, the Administrative Agent and the Banks that the Guaranteed Obligations which are guarantied by the Guarantor pursuant to this Guaranty should be determined without regard to any rule of law or order which may relieve any Obligor of any portion of such Guaranteed Obligations. 20. Notices. All notices, requests, consents and other ------- communications under this Guaranty shall be in writing and shall be deemed to have been given to the Guarantor when received, if hand delivered or sent by courier service, on the third Business Day after mailing, if mailed by registered or certified mail, postage prepaid, on the business day of receipt if telecopied, in each case addressed to the Guarantor at its address set forth below its signature or to such other address as the Guarantor may designate by written notice to the Administrative Agent; provided that Demands made by the Administrative Agent under Section 2 and service of process under Section 15 may also be given to the Process Agent. D-9 21. Entire Agreement. This Guaranty represents the final agreement ---------------- of the Guarantor with respect to its obligations to the Banks in connection with the Credit Agreement and may not be contradicted by evidence of prior written agreements or prior, contemporaneous or subsequent oral agreements of the Guarantor or any other person. There are no unwritten oral agreements of the Guarantor in favor of the Banks. D-10 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duty executed as of the date first above written. HUGHES ELECTRONICS CORPORATION By: _________________________ Name: _______________________ Title: ______________________ Address: Bldg. Cl, M/S A170 200 North Sepulveda Blvd. El Segundo, CA 90245 Attention: Edward B. Clarkson D-11 EXHIBIT E [FORM OF GUARANTY OF DARLENE] GUARANTY -------- THIS GUARANTY, dated as of June 3, 1999, is made by DARLENE INVESTMENTS LLC, an exempted company organized and existing under the laws of the Cayman Islands, the "Guarantor"), in favor of CITICORP USA, INC., a Delaware --------- corporation, as Administrative Agent for and representative of the financial institutions party to the credit Agreement defined below (together with its successors and permitted assignees in such capacity, the "Administrative -------------- Agent"). - ----- RECITALS -------- A. The Guarantor is an owner, directly or indirectly, of approximately 20.4% of the equity of SurFin Ltd., an international business company incorporated under the laws of the Bahamas (the "Borrower"). Pursuant -------- to that certain Credit Agreement of even date herewith (as it may be amended, supplemented or otherwise modified from time to time the "Credit Agreement") ---------------- among the Borrower the Designated Subsidiaries (as defined in the Credit Agreement), the Banks party thereto and the Administrative Agent, as agent for the Banks, the Banks have agreed to make available a $400,000,000 revolving credit facility to the Borrower and the Designated Subsidiaries (each an "Obligor" and collectively the "Obligors"). The Borrower has advised the Guarantor, the Administrative Agent and the Banks that the Obligors intend to use the proceeds of the such revolving credit facility to finance the development in Mexico and various countries in the Caribbean, Central America and South America of a satellite television service. B. The Banks are willing to enter into the Credit Agreement on the condition that the Guarantor guarantees, jointly and severally with the other owners (or their affiliates) of the Borrower, the performance and payment of the Borrower's obligations under the Credit Agreement pursuant to the terms of this Guaranty. NOW, THEREFORE, in consideration of the foregoing promises and other good and valuable consideration, receipt and sufficiency of which are acknowledged, the Guarantor hereby agrees as follows: 1. Definitions. Capitalized terms not otherwise defined in this ----------- Guaranty shall have the meanings given them in the Credit Agreement. 2. Guaranty. -------- (a) The Guarantor hereby irrevocably and unconditionally, guarantees the punctual payment when due of all payment obligations of the Borrower under the Credit E-1 Agreement, up to a maximum amount as to principal of US$400,000,000 plus all interest, fees, indemnities and other amounts payable under the Credit Agreement, including amounts that would become due but for the operation of the automatic stay under Section 362(c) of the United States Bankruptcy Code or similar provisions under the laws of the Bahamas, The Netherlands or other applicable law (collectively, the "Guaranteed Obligations"). In the event that ---------------------- any of the Guaranteed Obligations shall not be paid when due within any specified grace period provided for in the Credit Agreement, the Guarantor agrees to pay such Guaranteed Obligations within ten Business Days after the giving by the Administrative Agent to the Guarantor Notice Agent named in Section 20 hereof and the Process Agent named in Section 15 hereof of notice (a "Demand") demanding payment by the Guarantor, provided that in the event any -------- such payment is required to be made by the Guarantor hereunder, the Guarantor may cause such obligation or liability to be paid on its behalf by any corporation affiliated with it, including the Obligors, provided that the Guarantor shall nevertheless be unconditionally obligated to pay such obligation or liability if such affiliate, including the Obligors, shall fail timely to pay such obligation or liability. (b) This Guaranty is a guarantee of payment and not of performance or collection. The obligation of the Guarantor hereunder shall be independent of the obligation of any other Guarantor (as such term is defined in the Credit Agreement), all such obligations being joint and several. (c) The Guarantor shall be subrogated to all rights of the Banks against the Obligors in respect of any amounts paid by the Guarantor pursuant to the provisions of this Guaranty; provided, however, that the Guarantor shall not -------- ------- be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all the Guaranteed Obligations shall have been irrevocably and indefeasibly paid in full and no Guaranteed Obligations may arise in the future. 3. Guaranty Absolute. The liability of the Guarantor under this ----------------- Guaranty with respect to each and all of the Guaranteed Obligations shall be irrevocable and shall be absolute and unconditional irrespective of, and shall not be released, discharged or in any way affected by, any circumstance, condition or matter (whether or not the Guarantor or any Obligor shall have any knowledge or notice thereof), including, without limitation: (a) any amendment, waiver, extension or renewal of, or any consent to departure from, the Credit Agreement, including, without limitation, any waiver or consent involving a change in the time, manner or place of payment of all or any of the Guaranteed Obligations; (b) any exchange, release or nonperfection of any collateral, or any release or amendment or waiver of or consent or departure from any other guaranty or security agreement, for all or any of the Guaranteed Obligations; E-2 (c) any extension of the time for payment by any Obligor or any other person of any Guaranteed Obligation under the Credit Agreement or any other document related thereto; (d) any failure, omission or delay by the Administrative Agent or the Banks to enforce, assert or exercise any right, power or remedy conferred on or available to it; (e) any inability, lack of authority or legal disability of any Obligor to perform any agreement, covenant, term or condition contained in the Credit Agreement for any reason (whether or not the Guarantor shall have any knowledge or notice thereof), including, without limitation, provisions of any law or regulation of any jurisdiction (including the Bahamas and The Netherlands) purporting to prohibit or excuse payment or performance by any Obligor of its obligations under the Credit Agreement; (f) the voluntary or involuntary liquidation, dissolution, sale of assets, marshalling of assets and liabilities, receivership, conservatorship, custodianship, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of or similar proceeding affecting any Obligor, the Guarantor, the Administrative Agent, the Banks or any other person or any of their respective properties or creditors, or any action taken by any trustee or receiver or by any court in any such proceeding; (g) any merger or consolidation of any Obligor into or with any person or any sale, lease or transfer of any of the assets of any Obligor to any other person; (h) any change in corporate relationship between any Obligor and the Guarantor or any termination of any such relationship; (i) any counterclaim, set-off, deduction or defense any Obligor, the Guarantor or any other Person may have against the Administrative Agent, the Banks or any other person other than indefeasible payment in full; and (j) any other circumstance whatsoever, whether similar or dissimilar to the foregoing, which might otherwise constitute a legal or equitable defense available to, or a discharge of, the Guarantor in respect of this Guaranty. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment by any Obligor, the Guarantor or any other person of any of the Guaranteed Obligations owed hereunder is rescinded or must otherwise be returned by the Administrative Agent or the Banks upon the insolvency, bankruptcy or reorganization of any Obligor, the Guarantor or any other person, all as though such payment had not been made. If the payment of any sum required to be made by any Obligor under the Credit Agreement shall at E-3 any time be prevented by reason of a case or proceeding under bankruptcy, insolvency or other similar law, the Guarantor agrees that, for purposes of this Guaranty and its obligations hereunder, such sum shall be deemed to be payable in accordance with the terms of the Credit Agreement, and the Guarantor shall pay such sum and any other amounts guaranteed hereunder. 4. Waiver by the Guarantor. The Guarantor hereby unconditionally ----------------------- waives, to the greatest extent permitted by applicable law, (i) any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by the Banks upon this Guaranty, or acceptance of this Guaranty, and the Guaranteed Obligations, (ii) any requirement that the Banks exhaust any right or take any action against any Obligor, any other guarantor or any other person or any collateral, (iii) any and all rights which the Guarantor may have or which at any time hereafter may be conferred upon it, by statute (including but not limited to any statute of limitations), regulation or otherwise, to terminate or cancel this Guaranty, (iv) all notices which may be required by statute, rule of law or otherwise to preserve any rights against the Guarantor hereunder, including, without limitation, any demand, presentment, protest, proof or notice of nonpayment of any amounts payable under or in respect of the Credit Agreement, and notice of any failure on the part of any Obligor to perform and comply with any term or condition of the Credit Agreement, (v) any rights to the enforcement, assertion or exercise of any right, remedy, power or privilege under or in respect of the Credit Agreement, (vi) any requirement of diligence and (vii) notice of acceptance of this Guaranty. The Administrative Agent shall have the right to bring suit directly against the Guarantor with respect to the Guaranteed Obligations, either prior to or concurrently with any lawsuit against, or without bringing suit against, any Obligor. 5. Continuing Guaranty. This Guaranty is a continuing guaranty and ------------------- shall (a) be irrevocable and remain in full force and effect in accordance with the terms hereof until all of the Guaranteed Obligations, including those which might arise at a later date, have been paid in full and are not subject to rescission or return, (b) be binding upon the Guarantor and its successors and assigns, and (c) inure to the benefit of and be enforceable by the successors, transferees and assigns of the Administrative Agent and the Banks permitted by the Credit Agreement. The Guarantor agrees that in the discharge of its obligations hereunder no judgment, order, or exhaustion need be obtained, and no action, suit or proceeding need be brought and no other remedies need be exhausted against any Obligor or any other person for performance by the Guarantor of its obligations hereunder 6. Representations. The Guarantor represents and warrants to the --------------- Administrative Agent as follows: (a) The Guarantor is an exempted company validly existing and in good standing under the laws of the Cayman Islands and the execution, delivery and performance of this Guaranty are within its corporate powers and are not in contravention of the terms of its Certificate of Incorporation, Memorandum of Association or Articles of Association. (b) The execution, delivery and performance of this Guaranty have been duly authorized by all requisite corporate action of the Guarantor, and this Guaranty has E-4 been duly executed and delivered by the Guarantor and constitutes its legal, valid and binding obligation and is enforceable against the Guarantor in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other laws now or hereafter affecting the rights of creditors. (c) The execution, delivery and performance of this Guaranty will not violate or conflict with (i) any provision of any law or regulation binding on the Guarantor, or any order, judgment, award or decree of any court, arbitrator or governmental authority binding on the Guarantor or any securities issued by the Guarantor, or any mortgage, indenture, lease, contract or other agreement, instrument or undertaking to which the Guarantor is a party or by which the Guarantor or any of its assets may be bound, the violation of which would have a material adverse effect on the business, operations, assets or financial condition of the Guarantor or (ii) the Certificate of Incorporation, Memorandum of Association or Articles of Association of the Guarantor, and will not result in, or require, the creation or imposition of any Lien on any of its property, assets or revenues pursuant to the provisions of any such mortgage, indenture, lease, contract or other agreement, instrument or undertaking. 7. Financial Information; Access. ----------------------------- (a) So long as the Credit Agreement remains in effect the Guarantor agrees (i) to provide to the Administrative Agent a copy of all such reports and financial information pertaining to the Guarantor as shall be filed by or on behalf of the Guarantor with the Securities and Exchange Commission, promptly after the same are so filed, and (ii) to provide to the Administrative Agent such other financial information as the Administrative Agent may reasonably request. (b) The Guarantor further agrees to permit the Administrative Agent reasonable access, upon prior notice and at reasonable times during normal business hours, to the Guarantor's books, records, and financial or accounting personnel, to the extent relevant to this Guaranty or the Credit Agreement; provided, however, that such access shall be in compliance with security and confidentiality requirements of applicable governmental authorities and the Guarantor's corporate policies relating to confidential information. 8. Merger, Consolidation or Other Transfers. ---------------------------------------- (a) The Guarantor shall not consolidate with or merge into any other person or convey, transfer or lease all or substantially all of its assets as an entirety to any person unless: (i) such successor entity or such person to whom the conveyance, transfer or lease is made (a "Successor Guarantor") shall expressly assume in ------------------- writing by instrument or instruments enforceable against it reasonably satisfactory in form and substance to the Administrative Agent, the due and punctual payment of all obligations of the Guarantor under E-5 this Guaranty with the same effect as if such Successor Guarantor had originally been named a Guarantor herein or had been a party hereto; (ii) immediately after giving effect to such transaction, no Event of Default shall exist and this Guaranty shall be in full force and effect; and (iii) the Successor Guarantor shall have delivered to the Administrative Agent an opinion of counsel in scope and substance reasonably satisfactory to it stating that such consolidation, merger, conveyance, transfer or lease and the assumption agreement required by clause (i) above comply with this Section 8. (b) Upon any such consolidation or merger, conveyance, transfer or lease in accordance with the provisions of (a) above, the successor formed by such consolidation or into which the Guarantor is merged, or the person to which such conveyance, transfer or lease is made, shall succeed to, and be substituted for, the Guarantor as a Guarantor, with the same effect as if such successor had been originally named as a Guarantor. 9. Taxes. All payments or reimbursements under this Guaranty and any ----- instrument or agreement required hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any and all present and future Taxes (as defined below). The Guarantor agrees to cause all such Taxes to be paid on behalf of any Bank or Administrative Agent directly to the appropriate governmental authority. If the Guarantor is legally prohibited from complying with this section, payments due to such Bank or Administrative Agent under this Guaranty and any instrument or agreement required hereunder shall be increased so that, after provisions for Taxes and all Taxes on such increase, the amounts received by such Bank or Administrative Agent will be equal to the amounts required under this Guaranty and any instrument or agreement required hereunder as if no Taxes were due on such payments. The Guarantor shall indemnify each Bank and Administrative Agent for the full amount of Taxes payable by such Bank or Administrative Agent and any liabilities (including penalties, interest and expenses) arising from such Taxes within thirty (30) days from any written demand by such Bank. The Guarantor shall provide evidence that all applicable Taxes have been paid to the appropriate taxing authorities by delivering to Administrative Agent official tax receipts or notarized copies or other evidence thereof reasonably satisfactory to Administrative Agent, within ninety (90) days after the due date for such Tax payment. Such Bank will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such payment or reimbursement and will not be otherwise disadvantageous to such Bank in the sole discretion of such Bank. For purposes of this Section 9, "Tax" and "Taxes" means (i) all taxes, levies, imposts, duties, fees or other charges of whatsoever nature however imposed by any country or any subdivision or authority of or in that country in any way connected with the Credit Agreement or this Guaranty or any instrument or agreement required hereunder, and all interest, penalties or similar liabilities with respect thereto, except such taxes as are imposed on or measured by the Administrative Agent's or any Bank's net income or capital and franchise taxes, by the country or any subdivision or authority of or in that country in which the Administrative Agent's or such Bank's principal office or actual Lending Office is located, and (ii) any present E-6 or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Guaranty. 10. Amendments, Etc. No amendment or waiver of any provision of this ---------------- Guaranty shall in any event be effective with respect to the Administrative Agent unless the same shall be in writing and signed by the Administrative Agent. 11. No Waiver; Remedies. No failure on the part of the ------------------- Administrative Agent to exercise, and no delay in its exercise of, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder by the Administrative Agent preclude any other or further exercise thereof or the exercise of any other right by it. Subject to Section 11.1 of the Credit Agreement, the Administrative Agent may specifically waive any breach of this Guaranty by the Guarantor; provided that -------- no such waiver shall be effective or binding unless in writing, and that no such waiver shall constitute a continuing waiver of similar or other breaches. 12. Separability of This Guaranty. In case any term or provision of ----------------------------- this Guaranty or any application hereof to any circumstance shall, in any circumstances or jurisdiction and to any extent, be invalid, illegal or unenforceable, such term or provision shall be ineffective as to such jurisdiction to the extent of such invalidity, illegality or unenforceability without invalidating or rendering unenforceable any remaining terms and provisions hereof or the application of such term or provision to circumstances or jurisdictions other than those as to which it is held invalid, illegal or unenforceable. To the extent permitted by applicable law, the Guarantor hereby waives any provision of law that renders any term or provision hereof invalid, illegal or unenforceable in any respect. 13. Headings. The headings contained in this Guaranty are for -------- convenience of reference only and shall not modify, define or limit any of the terms or provisions hereof. 14. Governing Law. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF ------------- THE GUARANTOR, THE ADMINISTRATIVE AGENT AND THE BANKS HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5- 1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 15. Proceedings, Etc. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE ----------------- GUARANTOR ARISING OUT OF OR RELATING TO THIS GUARANTY MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY THE GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS E-7 GUARANTY. The Guarantor hereby designates and appoints CT Corporation System, presently located at 1633 Broadway, New York, NY 10019, as its authorized agent (the "Process Agent") to accept and acknowledge on its behalf service of any and all process which may be served in any suit, action or proceeding in any New York State or United States Federal Court sitting in New York, and to receive and acknowledge on behalf of the Guarantor any Demands made by the Administrative Agent pursuant to Section 2 hereof. The Guarantor represents and warrants that the Process Agent has agreed in writing to accept such appointment and that true copies of such acceptance will be furnished to the Administrative Agent prior to the Effective Date under the Credit Agreement. The Guarantor agrees that the failure of the Process Agent to give notice to the Guarantor of any such service or Demand shall not impair the validity of such service or Demand or of any judgment rendered in any action or proceeding based thereon. Service of all process in any such proceeding in any such court and of any Demand under Section 2 hereof may be made by hand delivery, courier service or by registered or certified mail, return receipt requested, to the Process Agent, such service being hereby acknowledged by the Guarantor to be sufficient for personal jurisdiction in any action against the Guarantor in any such court and to be otherwise effective and binding service or demand in every respect. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of the Administrative Agent or any Bank to bring proceedings against the Guarantor in the courts of any other jurisdiction. 16. Jury Trial Waiver. THE GUARANTOR AND, BY ITS ACCEPTANCE OF THE ----------------- BENEFITS HEREOF, THE ADMINISTRATIVE AGENT EACH HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. The scope of this waiver is intended to be all- encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims and all other common law and statutory claims. The Guarantor and, by its acceptance of the benefits hereof, the Administrative Agent each (i) acknowledges that this waiver is a material inducement for the Guarantor and Administrative Agent to enter into a business relationship, that the Guarantor and Administrative Agent have already relied on this waiver in entering into this Guaranty or accepting the benefits thereof, as the case may be, and that each will continue to rely on this waiver in their related future dealings, and (ii) further warrants and represents that each has reviewed this waiver with its legal counsel and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, EXCEPT BY A WRITTEN INSTRUMENT SPECIFICALLY REFERRING TO THIS SECTION 16, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS GUARANTY. In the event of litigation, this Guaranty may be filed as a written consent to a trial by the court. 17. Counterparts. This Guaranty may be executed in any number of ------------ counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original for all purposes; but all such counterparts together shall constitute but one and the same instrument. This Guaranty shall become effective as to the Guarantor upon the execution of a counterpart hereof by the E-8 Guarantor and receipt by Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. 18. Cost and Attorneys Fees. The Guarantor agrees to pay, or cause ----------------------- to be paid, in addition to the Guaranteed Obligations, on demand, and to save the Administrative Agent and the Banks harmless against liability for, any and all costs and expenses (including reasonable fees and disbursements of counsel incurred or expended by Administrative Agent or any Bank in connection with the enforcement of or preservation of any rights under this Guaranty. 19. Effect of Borrower's Bankruptcy. The Guarantor acknowledges and ------------------------------- agrees that any interest on any portion of the Guaranteed Obligations which accrues after the commencement of any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of the Borrower (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Guaranteed Obligations if said proceeding had not been commenced) shall be included in the Guaranteed Obligations because it is the intention of the Guarantor, the Administrative Agent and the Banks that the Guaranteed Obligations which are guarantied by the Guarantor pursuant to this Guaranty should be determined without regard to any rule of law or order which may relieve the Borrower of any portion of such Guaranteed Obligations. 20. Notices. All notices, requests, consents and other ------- communications under this Guaranty shall be in writing and shall be deemed to have been given to the Guarantor when received, if hand delivered or sent by courier service, on the third Business Day after mailing, if mailed by registered or certified mail, postage prepaid, on the business day of receipt if telecopied, in each case addressed to the Guarantor in care of Galaxy Latin America, as Guarantor Notice Agent, at Sasson House, Shirley Street & Victoria Ave., Nassau, Bahamas, Attention: Sean McWeeney (with a copy to Despacho de Especialistas en Abogacia, S.A., P.O. Box 1884-1000, De la Casa Italia, 100 metros al este y 50 al norte, Numero 685, San Jose, Costa Rica, Attention: Lic. Olga Marta Mena (with copies to: (i) Galaxy Latin America, LLC, 2400 E. Commercial Blvd., 10th Floor, Fort Lauderdale, FL 33308, Attention: E.R. Gentile and (ii) c/o Finser Corporation, 550 Biltmore Way, 9th Floor, Coral Gables, FL 33134, Attention: Ed Hernandez)), or to such other address in the Bahamas or the United States as the Guarantor may designate by written notice to the Administrative Agent; provided that Demands made by the Administrative Agent under Section 2 and service of process under Section 15 may also be given to the Process Agent. The Guarantor hereby designates and appoints Galaxy Latin America as its agent (the "Guarantor Notice Agent") to receive and acknowledge on behalf of the Guarantor any notice, requests, consents and other communications given under this Guaranty. 21. Judgment. (a) If for the purposes of obtaining judgment in any -------- court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the respective Bank or the Administrative Agent could purchase Dollars with such other currency at New York, New York, on the Business Day preceding that on which final judgment is given. E-9 (b) The obligation of the Guarantor in respect of any sum due from it to Administrative Agent or any Bank hereunder shall, notwithstanding any judgment in a currency other than Dollars, be discharged only to the extent that on the Business Day following receipt by the Administrative Agent or any Bank of any sum adjudged to be so due in such other currency the Administrative Agent or such Bank may in accordance with normal banking procedures purchase Dollars with such other currency; if the Dollars so purchased are less than the sum originally due to the Administrative Agent or such Bank in Dollars, the Guarantor agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or such Bank against such loss, and if the Dollars so purchased exceed the sum originally due to the Administrative Agent or such Bank in Dollars, the Administrative Agent or such Bank agrees to remit to the Guarantor such excess. 22. No Immunity. To the extent that the Guarantor has or hereafter ----------- may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the Guarantor hereby irrevocably waives such immunity in respect of its obligations under this Guaranty and, without limiting the generality of the foregoing, agrees that the waivers set forth in this Section 22 shall have the fullest scope permitted under the Foreign Sovereign Immunities Act of 1976 of the United States and are intended to be irrevocable for purposes of such Act. 23. Entire Agreement. This Guaranty represents the final agreement ---------------- of the Guarantor with respect to its obligations to the Banks in connection with the Credit Agreement and may not be contradicted by evidence of prior written agreements or prior, contemporaneous or subsequent oral agreements of the Guarantor or any other person. There are no unwritten oral agreements of the Guarantor in favor of the Banks. E-10 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duty executed as of the date first above written. DARLENE INVESTMENTS LLC By: _______________________ Name: _____________________ Title: ____________________ E-11 EXHIBIT F-1 [FORM OF OPINION OF BAHAMIAN COUNSEL] [THE LETTERHEAD OF BAHAMIAN COUNSEL] ______________, 1999 Citicorp USA, Inc., as Administrative Agent One Court Square Long Island City, NY 11120 and The Banks Listed on Schedule A Hereto Re: Credit Agreement dated as of June 3, 1999 among SurFin Ltd., the Designated Subsidiaries (as defined therein), the Banks named therein, Bank of America National Trust and Savings Association, as Syndication Agent, Deutsche Bank AG, New York and Cayman Islands Branches, as Documentation Agent, and The Chase Manhattan Bank, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York and Westdeutsche Landesbank Girozentrale, New York and Cayman Islands Branches, as Senior Managing Agents, and Citicorp USA, Inc., as Administrative Agent Ladies and Gentlemen: We have acted as Bahamian counsel to SurFin Ltd., an international business company organized and existing under the laws of the Bahamas (the "Borrower"), and Dish Placement Services, Ltd., an international business company organized and existing under the laws of the Bahamas (the "Designated Subsidiary") in connection with that certain Credit Agreement dated as of June 3, 1999 (the "Credit Agreement") among the Borrower, the Designated Subsidiaries (as defined therein) the banks named therein ("Banks"), Bank of America National Trust and Savings Association, as Syndication Agent, Deutsche Bank AG, New York and Cayman Islands Branches, as Documentation Agent, and The Chase Manhattan Bank, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York and Westdeutsche Landesbank Girozentrale, New York and Cayman Islands Branches, as Senior Managing Agents, and Citicorp USA, Inc., as Administrative Agent. This opinion is rendered to you in compliance with Section 5(a)(vi)(A) of the Credit Agreement. Capitalized terms used herein without definition have the same meanings as in the Credit Agreement. F1-1 In our capacity as such counsel, we have examined originals, or copies identified to our satisfaction as being true copies, of such records, documents or other instruments as in our judgment are necessary or appropriate to enable us to render the opinions expressed below. These records, documents and instruments included the following: (a) The Certificate of Incorporation of the Borrower and of the Designated Subsidiary, each as amended to date; (b) The Memorandum and Articles of Association of the Borrower and of the Designated Subsidiary, each as amended to date; (c) All records of proceedings and actions of the Board of Directors of the Borrower and of the Designated Subsidiary relating to the Credit Agreement and the transactions contemplated thereby; and (d) The Credit Agreement. We have been furnished with, and with Banks' consent have relied upon, certificates of officers of the Borrower and of the Designated Subsidiary with respect to certain factual matters, copies of which are attached hereto. In addition, we have obtained and relied upon such certificates and assurances from public officials as we have deemed necessary, copies of which have been delivered to Banks. In all such examinations, we have assumed the genuineness of all signatures on original and certified documents, and the conformity to original or certified documents of all documents submitted to us as conformed or photostatic copies. We have investigated such questions of law for the purpose of rendering this opinion as we have deemed necessary. We are opining herein as to the effect on the subject transactions of only the laws of the Bahamas. On the basis of the foregoing, and in reliance thereon, and subject to the limitations, qualifications and exceptions set forth below, we are of the opinion that: 1. Each of the Borrower and the Designated Subsidiary is an International Business Company duly organized, validly existing and in good standing under the laws of the Bahamas and has all requisite corporate power and authority to own and operate its properties and to carry on its business as now conducted. 2. Each of the Borrower and the Designated Subsidiary has all requisite corporate power and authority to execute and deliver the Credit Agreement and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement. 3. The execution and delivery of the Credit Agreement and the performance thereof have been duly authorized by all necessary institutional and legal action, including all corporate action on the part of the Borrower and of the Designated Subsidiary. The Credit Agreement has been duly executed and delivered by the Borrower and by the Designated Subsidiary. F1-2 4. Neither the execution and delivery of the Credit Agreement by the Borrower or by the Designated Subsidiary nor the consummation of the transactions contemplated by the Credit Agreement nor the compliance with the terms and conditions thereof by the Borrower and the Designated Subsidiary conflicts with, results in a breach or violation of, or constitutes a default under, any of the terms, conditions or provisions of the Certificate of Incorporation or Memorandum or Articles of Association of the Borrower or of the Designated Subsidiary or of any of their respective Subsidiaries, any term of any order, writ, judgment or decree known to us of the Bahamas or any governmental authority thereof or therein to which the Borrower or the Designated Subsidiary or any of their respective Subsidiaries is a party or by which any of its properties or assets are bound, or any present statute, law, rule, regulation, directive, guideline or policy statement of the Bahamas or any governmental authority thereof or therein binding on the Borrower or the Designated Subsidiary or any of their respective Subsidiaries. 5. No consents, licenses or approvals of, authorizations by, or registrations, recordations, declarations or filings with, the Bahamas or any governmental authority thereof or therein are required by the Borrower or the Designated Subsidiary in connection with the execution and delivery by the Borrower and the Designated Subsidiary of the Credit Agreement and the performance by the Borrower and the Designated Subsidiary of the Credit Agreement or the extensions of credit thereunder or the payment by the Borrower or the Designated Subsidiary of its obligations thereunder (including, without limitation, any governmental authorization, license, approval or consent required by exchange regulations to enable the Borrower or the Designated Subsidiary punctually to pay its obligations under the Credit Agreement in U.S. dollars) or the consummation of any of the other transactions contemplated by the Credit Agreement. 6. The Credit Agreement is in proper legal form under the laws of the Bahamas for the enforcement thereof in accordance with its terms against the Borrower and the Designated Subsidiary under such laws. 7. To the best of our knowledge, there are no actions, suits or proceedings pending or threatened against the Borrower or the Designated Subsidiary or any of their respective Subsidiaries. 8. The Borrower and the Designated Subsidiary are, under the laws of the Bahamas, subject to civil and commercial law with respect to their obligations under the Credit Agreement. 9. The choice by the parties to the Credit Agreement of the law of the State of New York is a valid choice of law under Bahamian law, and accordingly, New York substantive law will be applied by the courts of the Bahamas if the Credit Agreement or any claim thereunder come under their jurisdiction. 10. The submission to jurisdiction by the Borrower and the Designated Subsidiary, the appointment of the agent for service of process by the Borrower and the Designated Subsidiary and the designation of the agent for service of process contained in F1-3 Section 11.19 of the Credit Agreement are valid and effective under the laws of the Bahamas and are irrevocably binding on the Borrower and the Designated Subsidiary. 11. The obligations of the Borrower and the Designated Subsidiary under the Credit Agreement may be enforced (by judgment and levy) in accordance with its terms in a proceeding at law in any competent court in the Bahamas at the suit of the Administrative Agent or the Banks. Any judgment against the Borrower or the Designated Subsidiary of a state or United States federal court in the State of New York or United States of America is enforceable subject to action brought in the courts of the Bahamas in accordance with the laws of the Bahamas. 12. Under current law, the Borrower and the Designated Subsidiary are permitted to make all payments under the Credit Agreement free and clear of, and without deduction or withholding for or on account of, any taxes, levies, imposts, duties, fees, assessments or other charges of the Bahamian or any governmental authority thereof or therein or by any federation or association of or with which the Bahamas may be a member or associated, and all such payments in the hands of the Banks will not be subject to any such taxes, levies, imposts, duties, fees, assessments or other charges. The Credit Agreement is not subject to any stamp or documentary tax or other similar charge, including but not limited to any registration or stamp tax of the Bahamian or any governmental authority thereof or therein. None of the Banks is or will be deemed to be resident, domiciled, carrying on business or subject to taxation in the Bahamas by reason of the execution, performance or enforceability or admissibility in evidence of the Credit Agreement. In the Bahamas, it is not necessary that the Credit Agreement or any other document be filed or recorded, or that any tax or duty be paid. 13. All obligations of the Borrower and the Designated Subsidiary to pay the principal of and interest under the Credit Agreement and all other amounts which may become due under the Credit Agreement constitute direct and unconditional obligations of the Borrower and the Designated Subsidiary, and rank at least pari passu in priority of payment with all other unsecured Indebtedness of the Borrower and the Designated Subsidiary. Our opinions in paragraphs 4 and 5 above as to compliance with certain statutes, rules and regulations and as to the lack of any required consents or approvals of, authorizations by, or registrations, declarations or filings with certain governmental authorities are based upon a review of those statutes, rules and regulations which, in our experience, are normally applicable to transactions of the type contemplated by the Credit Agreement. Our opinion that an obligation or document is enforceable means that the obligation or document is of a type and form which courts in the Commonwealth of The Bahamas will enforce. It does not mean that the obligation or document can necessarily be enforced in accordance with its terms in all circumstances. In particular: (i) equitable remedies, such as injunctions and orders of specific performance, are discretionary; and F1-4 (ii) the enforceability of an obligation, document or security interest may be affected by statutes of limitation, by estoppel and similar principles, by laws concerning insolvency, bankruptcy, liquidation, enforcement of security interests or reorganization, or by other laws generally affecting creditors' rights. This opinion is rendered only to Administrative Agent and Banks and is solely for their benefit in connection with the above transactions. This opinion may not be relied upon by Administrative Agent or Banks for any other purpose, or quoted to or relied upon by any other person, firm or corporation for any purpose without our prior written consent. You may, however, deliver a copy of this opinion to permitted assignees of all or a portion of a Bank's rights and obligations under the Credit Agreement in connection with such assignment and such assignees may rely hereon. This opinion may also be disclosed to regulatory or other governmental authorities having jurisdiction over you requesting (or requiring) such disclosure. Very truly yours, F1-5 SCHEDULE A Citibank, N.A. Bank of America National Trust and Savings Association Deutsche Bank AG New York and Cayman Islands Branches The Chase Manhattan Bank The First National Bank of Chicago Morgan Guaranty Trust Company of New York Westdeutsche Landesbank Girozentrale- New York and Cayman Islands Branches The Bank of New York Banque Nationale De Paris Paribas Mellon Bank, N.A. San Paolo IMI Bank Bank Hapolim B.M. Bayerische Landesbank Girozentrale, Cayman Islands Branch KBC Bank, N. V. The Mitsubishi Trust and Banking Corporation, New York Branch UniCredito Italino S.p.A. Schedule A-1 EXHIBIT F-2 [FORM OF OPINION OF NETHERLANDS COUNSEL] [THE LETTERHEAD OF NETHERLANDS COUNSEL] _______________, 1999 Citicorp USA, Inc., as Administrative Agent One Court Square Long Island City, NY 11120 and The Banks Listed on Schedule A Hereto Re: Credit Agreement dated as of June 3, 1999, among SurFin Ltd., the Designated Subsidiaries (as defined therein) the Banks named therein, Bank of America National Trust and Savings Association, as Syndication Agent, Deutsche Bank AG, New York and Cayman Islands Branches, as Documentation Agent, and The Chase Manhattan Bank, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York, and Westdeutsche Landesbank Girozentrale, New York and Cayman Islands Branches, as Senior Managing Agents, and Citicorp USA, Inc., as Administrative Agent Ladies and Gentlemen: We have acted as Netherlands counsel to White Holding B.V., a company organized and existing under the laws of the Netherlands (the "Designated Subsidiary") in connection with the Credit Agreement dated as of June 3, 1999 (the "Credit Agreement") among SurFin Ltd., the Designated Subsidiaries (as defined therein), the banks named therein ("Banks"), and Bank of America National Trust and Savings Association, as Syndication Agent, Deutsche Bank AG, New York and Cayman Islands Branches, and The Chase Manhattan Bank, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York and Westdeutsche Landesbank Girozentrale, New York and Cayman Islands Branches, as Senior Managing Agents, and Citicorp USA, Inc., as Administrative Agent. This opinion is rendered to you in compliance with Section 5(a)(vi)(B) of the Credit Agreement. Capitalized terms used herein without definition have the same meanings as in the Credit Agreement. In our capacity as such counsel, we have examined originals, or copies identified to our satisfaction as being true copies, of such records, documents or other instruments as in our judgment are necessary or appropriate to enable us to render the opinions expressed below. These records, documents and instruments included the following: F2-1 (a) The Certificate of Incorporation of the Designated Subsidiary, as amended to date; (b) The Memorandum and Articles of Association of the Designated Subsidiary, as amended to date; (c) All records of proceedings and actions of the Board of Directors of the Designated Subsidiary relating to the Credit Agreement and the transactions contemplated thereby; and (d) The Credit Agreement. We have been furnished with, and with Banks' consent have relied upon, certificates of officers of the Designated Subsidiary with respect to certain factual matters, copies of which are attached hereto. In addition, we have obtained and relied upon such certificates and assurances from public officials as we have deemed necessary, copies of which have been delivered to Banks. In all such examinations, we have assumed the genuineness of all signatures on original and certified documents, and the conformity to original or certified documents of all documents submitted to us as conformed or photostatic copies. We have investigated such questions of law for the purpose of rendering this opinion as we have deemed necessary. We are opining herein as to the effect on the subject transactions of only the laws of the Netherlands. On the basis of the foregoing, and in reliance thereon, and subject to the limitations, qualifications and exceptions set forth below, we are of the opinion that: 1. The Designated Subsidiary is a company duly organized, validly existing and in good standing under the laws of the Netherlands and has all requisite corporate power and authority to own and operate its properties and to carry on its business as now conducted. 2. The Designated Subsidiary has all requisite corporate power and authority to execute and deliver the Credit Agreement and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement. 3. The execution and delivery of the Credit Agreement and the performance of the Credit Agreement have been duly authorized by all necessary institutional and legal action, including all corporate action on the part of the Designated Subsidiary. The Credit Agreement has been duly executed and delivered by the Designated Subsidiary. 4. Neither the execution and delivery of the Credit Agreement by the Designated Subsidiary nor the consummation of the transactions contemplated by the Credit Agreement nor the compliance with the terms and conditions thereof by the Designated Subsidiary conflicts with, results in a breach or violation of, or constitutes a default under, any of the terms, conditions or provisions of the Certificate of Incorporation or Memorandum or Articles of Association of the Designated Subsidiary or of any of its Subsidiaries, any term of any order, writ, judgment or decree known to us of the Netherlands or any governmental authority thereof or therein to which the Designated Subsidiary or any of its Subsidiaries is a F2-2 party or by which any of its properties or assets are bound, or any present statute, law, rule, regulation, directive, guideline or policy statement of the Netherlands or any governmental authority thereof or therein binding on the Designated Subsidiary or any of its Subsidiaries. 5. No consents, licenses or approvals of, authorizations by, or registrations, recordations, declarations or filings with, the Netherlands or any governmental authority thereof or therein are required by the Designated Subsidiary in connection with the execution and delivery by the Designated Subsidiary of the Credit Agreement and the performance by the Designated Subsidiary of the Credit Agreement or the extensions of credit thereunder or the payment by the Designated Subsidiary of its obligations thereunder (including, without limitation, any governmental authorization, license, approval or consent required by exchange regulations to enable the Designated Subsidiary punctually to pay its obligations under the Credit Agreement in U.S. dollars) or the consummation of any of the other transactions contemplated by the Credit Agreement. 6. The Credit Agreement is in proper legal form under the laws of the Netherlands for the enforcement thereof in accordance with its terms against the Designated Subsidiary under such laws. 7. To the best of our knowledge, there are no actions, suits or proceedings pending or threatened against the Designated Subsidiary or any of its Subsidiaries. 8. The Designated Subsidiary is, under the laws of the Netherlands, subject to civil and commercial law with respect to its obligations under the Credit Agreement. 9. The choice by the parties to the Credit Agreement of the law of the State of New York is a valid choice of law under Dutch law, and accordingly, New York substantive law will be applied by the courts of the Netherlands if the Credit Agreement or any claim thereunder come under their jurisdiction. 10. The submission to jurisdiction by the Designated Subsidiary, the appointment of the agent for service of process by the Designated Subsidiary and the designation of the agent for service of process contained in Section 11.19 of the Credit Agreement are valid and effective under the laws of the Netherlands and are irrevocably binding on the Designated Subsidiary. 11. The obligations of the Designated Subsidiary under the Credit Agreement may be enforced (by judgment and levy) in accordance with its terms in a proceeding at law in any competent court in the Netherlands at the suit of the Administrative Agent or the Banks. Any judgment against the Designated Subsidiary of a state or United States federal court in the State of New York or United States of America is enforceable subject to action brought in the courts of the Netherlands in accordance with the laws of the Netherlands. 12. Under current law, the Designated Subsidiary is permitted to make all payments under the Credit Agreement free and clear of, and without deduction or withholding for or on account of, any taxes, levies, imposts, duties, fees, assessments or other charges of the Dutch or any governmental authority thereof or therein or by any federation or association of or with which the Netherlands may be a member or associated, and all such payments in the hands F2-3 of the Banks will not be subject to any such taxes, levies, imposts, duties, fees, assessments or other charges. The Credit Agreement is not subject to any stamp or documentary tax or other similar charge, including but not limited to any registration or stamp tax of the Bahamian or any governmental authority thereof or therein. None of the Banks is or will be deemed to be resident, domiciled, carrying on business or subject to taxation in the Netherlands by reason of the execution, performance or enforceability or admissibility in evidence of the Credit Agreement. In the Netherlands, it is not necessary that the Credit Agreement or any other document be filed or recorded, or that any tax or duty be paid. 13. All obligations of the Designated Subsidiary to pay the principal of and interest under the Credit Agreement and all other amounts which may become due under the Credit Agreement constitute direct and unconditional obligations of the Designated Subsidiary, and rank at least pari passu in priority of payment with all other unsecured Indebtedness of the Designated Subsidiary. Our opinions in paragraphs 4 and 5 above as to compliance with certain statutes, rules and regulations and as to the lack of any required consents or approvals of, authorizations by, or registrations, declarations or filings with certain governmental authorities are based upon a review of those statutes, rules and regulations which, in our experience, are normally applicable to transactions of the type contemplated by the Credit Agreement. Our opinion that an obligation or document is enforceable means that the obligation or document is of a type and form which courts in the Netherlands will enforce. It does not mean that the obligation or document can necessarily be enforced in accordance with its terms in all circumstances. In particular: (i) equitable remedies, such as injunctions and orders of specific performance, are discretionary; and (ii) the enforceability of an obligation, document or security interest may be affected by statutes of limitation, by estoppel and similar principles, by laws concerning insolvency, bankruptcy, liquidation, enforcement of security interests or reorganization, or by other laws generally affecting creditors' rights. This opinion is rendered only to Administrative Agent and Banks and is solely for their benefit in connection with the above transactions. This opinion may not be relied upon by Administrative Agent or Banks for any other purpose, or quoted to or relied upon by any other person, firm or corporation for any purpose without our prior written consent. You may, however, deliver a copy of this opinion to permitted assignees of all or a portion of a Bank's rights and obligations under the Credit Agreement in connection with such assignment and such assignees may rely hereon. This opinion may also be disclosed to regulatory or other governmental authorities having jurisdiction over you requesting (or requiring) such disclosure. Very truly yours, F2-4 SCHEDULE A Citibank, N.A. Bank of America National Trust and Savings Association Deutsche Bank AG New York and Cayman Islands Branches The Chase Manhattan Bank The First National Bank of Chicago Morgan Guaranty Trust Company of New York Westdeutsche Landesbank Girozentrale- New York and Cayman Islands Branches The Bank of New York Banque Nationale De Paris Paribas Mellon Bank, N.A. San Paolo IMI Bank Bank Hapolim B.M. Bayerische Landesbank Girozentrale, Cayman Islands Branch KBC Bank, N. V. The Mitsubishi Trust and Banking Corporation, New York Branch UniCredito Italino S.p.A. Schedule A-1 EXHIBIT G [FORM OF OPINION OF NEW YORK COUNSEL] [LETTERHEAD OF NEW YORK COUNSEL] __________, 1999 Citicorp USA, Inc., as Administrative Agent [Address of Agent] and The Banks Listed on Schedule A Hereto Re: Credit Agreement dated as of June 3, 1999 among SurFin Ltd., the Designated Subsidiaries, the Banks named therein, Bank of America National Trust and Savings Association, as Syndication Agent, Deutsche Bank AG, New York and Cayman Islands Branches, as Documentation Agent, and The Chase Manhattan Bank, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York, and Westdeutsche Landesbank Girozentrale, New York and Cayman Islands Branches, as Senior Managing Agents, and Citicorp USA, Inc., as Administrative Agent Ladies and Gentlemen: We have acted as New York counsel to SurFin Ltd., an international business company organized and existing under the laws of the Bahamas ("the Borrower"), Dish Placement Services, Ltd., an international business company organized and existing under the laws of the Bahamas, and White Holding B.V., a company organized and existing under the laws of the Netherlands (together the "Designated Subsidiaries") and Hughes Electronics Corporation, a Delaware corporation ("Hughes") in connection with that certain Credit Agreement dated as of June 3, 1999 (the "Credit Agreement") among the Borrower, the Designated Subsidiaries, the banks named therein ("Banks"), Bank of America National Trust and Savings Association, as Syndication Agent, Deutsche Bank AG, New York and Cayman Islands Branches, as Documentation Agent, and The Chase Manhattan Bank, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York, and Westdeutsche Landesbank Girozentrale, New York and Cayman Islands Branches, as Senior Managing Agents, and Citicorp USA, Inc., as Administrative Agent ("Administrative Agent"). This opinion is rendered to you in compliance with subsection 5.1(a)(vi)(C) of the Credit Agreement. Capitalized terms used herein without definition have the same meanings as in the Credit Agreement. G-1 In our capacity as such counsel, we have examined originals, or copies identified to our satisfaction as being true copies, of the Credit Agreement and the Hughes Guaranty and such other records, documents or other instruments as in our judgment are necessary or appropriate to enable us to render the opinions expressed below. We have been furnished with, and with Banks' consent have relied upon, certificates of officers of the Borrower and Hughes with respect to certain factual matters, copies of which are attached hereto. In addition, we have obtained and relied upon such certificates and assurances from public officials as we have deemed necessary, copies of which have been delivered to Banks. In all such examinations, we have assumed the genuineness of all signatures on original and certified documents, and the conformity to original or certified documents of all documents submitted to us as conformed or photostatic copies. For purposes of this opinion, we have relied upon the opinion of [NAME OF THE BAHAMIAN COUNSEL], the Bahamas counsel to the Borrower, dated the date hereof, a copy of which has been delivered to you. In rendering the opinion expressed in paragraph 1 below, we have assumed that: (i) the Credit Agreement has been duly authorized by, has been duly executed and delivered by, and (except, to the extent expressly set forth in the opinions expressed below, as to the Borrower and the Designated Subsidiaries) constitutes the legal, valid, binding and enforceable obligations of, all of the parties thereto; (ii) all signatories to the Credit Agreement have been duly authorized; and (iii) all of the parties to the Credit Agreement are duly organized and validly existing the have the power and authority (corporate, partnership or other) to execute and deliver and perform their respective obligations under the Credit Agreement. In rendering the opinion expressed in paragraph 8 below, we have assumed that the Hughes Guaranty has been duly authorized, executed and delivered by Hughes. We have investigated such questions of law for the purpose of rendering this opinion as we have deemed necessary. We are opining herein as to the effect on the subject transactions of only United States Federal law and the laws of the State of New York. On the basis of the foregoing, and in reliance thereon, and subject to the limitations, qualifications and exceptions set forth below, we are of the opinion that: 1. The Credit Agreement has been duly executed and delivered by the Borrower and the Designated Subsidiaries and constitutes the legally valid and binding obligation of the Borrower and the Designated Subsidiaries, enforceable against the Borrower and the Designated Subsidiaries in accordance with its terms. 2. Neither the execution and delivery of the Credit Agreement by the Borrower, nor the execution and delivery of the Credit Agreement by the Designated Subsidiaries, nor the consummation of the transactions contemplated by the Credit Agreement nor the compliance with the terms and conditions thereof by the Borrower and the Designated Subsidiaries (A) conflicts with, results in a breach or violation of, or constitutes a default under, G-2 any of the terms, conditions or provisions of (x) any term of any material agreement, instrument, order, writ, judgment or decree known to us after due inquiry to which the Borrower or the Designated Subsidiaries, or any of their respective Subsidiaries is a party or by which any of its properties or assets are bound, or (y) any present United States federal or New York statute, rule or regulation binding on the Borrower or the Designated Subsidiaries or any of their respective Subsidiaries, or (B) results in the creation of any Lien upon any of the properties or assets of the Borrower or the Designated Subsidiaries, or any of their respective Subsidiaries under any agreement or order referred to in clause (x) above. 3. No consents or approvals of, authorizations by, or registrations, declarations or filings with, any United States federal or New York governmental authority are required by the Borrower or the Designated Subsidiaries in connection with the execution and delivery by the Borrower and the Designated Subsidiaries of the Credit Agreement or the extensions of credit thereunder or the payment by the Borrower or the Designated Subsidiaries of its obligations thereunder. 4. There are no actions, suits or proceedings pending or threatened, to the best of our knowledge after due inquiry, against the Borrower or the Designated Subsidiaries or any of their respective Subsidiaries which have a significant likelihood of materially and adversely affecting either the ability of the Borrower or the Designated Subsidiaries to perform their obligations under any Loan Document or the financial condition or operations of the Borrower or the Designated Subsidiaries and their respective Subsidiaries, taken as a whole. 5. The making of the Loans and the application of the proceeds thereof as provided in the Credit Agreement do not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System. 6. It is not necessary in connection with the execution and delivery of the Credit Agreement for Banks to register the Credit Agreement or the Loans under the Securities Act of 1933, as amended, or to qualify any indenture in respect thereof under the Trust Indenture Act of 1939, as amended. 7. Neither the Borrower nor any of the Designated Subsidiaries is an "investment company" or company "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended. 8. The Hughes Guaranty constitutes the legally valid and binding obligation of Hughes, enforceable against Hughes in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally (including, without limitation, fraudulent conveyance laws) and by general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law. G-3 The foregoing opinions are subject to the following comments and qualifications: A. With respect to our opinion in paragraph 1 above, the validity, binding effect and enforceability of the Credit Agreement is subject to all applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors' rights generally and to the possible judicial application of foreign laws or governmental action affecting the enforcement of creditors' rights. In addition, we advise you that the enforceability of the Credit Agreement is subject to the effect of general principles of equity including concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law. B. The enforceability of Section 11.14 of the Credit Agreement may be limited by laws limiting the enforceability of provisions exculpating or exempting a party from, or requiring indemnification of a party for, liability for its own action or inaction, to the extent the action or inaction involves gross negligence, recklessness, willful misconduct or unlawful conduct. C. The enforceability of provisions in the Credit Agreement or the Hughes Guaranty to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. D. We express no opinion as to (i) the effect of the laws of any jurisdiction in which any Bank is located (other than the State of new York) that limits the interest, fees or other charges such Bank may impose, (ii) Section 11.17 of the Credit Agreement, (iii) the first sentence of Section 11.19 of the Credit Agreement and the first sentence of Section 15 of the Hughes Guaranty insofar as such sentences relate to any United States District Court sitting in New York or (iv) Section 11.18 of the Credit Agreement to the extent it purports to be a waiver of immunity acquired after the execution and delivery of the Credit Agreement. E. Our opinions in paragraphs 3 and 4 above as to compliance with certain statutes, rules and regulations and as to the lack of any required consents or approvals of, authorizations by, or registrations, declarations or filings with certain governmental authorities are based upon a review of those statutes, rules and regulations which, in our experience, are normally applicable to transactions of the type contemplated by the Credit Agreement. At the request of our clients, this opinion is provided to you by us in our capacity as New York counsel to the Borrower, the Designated Subsidiaries and Hughes, and this opinion letter may not be relied upon by any Person or quoted or reproduced for any purpose other than in connection with the transactions contemplated by the Credit Agreement (including in connection with any assignments contemplated by the Credit Agreement and any such permitted assignee may rely on this opinion as if were addressed and had been delivered to such assignee on the date hereof) without, in each instance, our prior written consent, except that this opinion may be disclosed to regulatory or other governmental authorities having jurisdiction over you requesting (or requiring) such disclosure. Very truly yours, G-4 SCHEDULE A Citibank, N.A. Bank of America National Trust and Savings Association Deutsche Bank AG New York and Cayman Islands Branches The Chase Manhattan Bank The First National Bank of Chicago Morgan Guaranty Trust Company of New York Westdeutsche Landesbank Girozentrale- New York and Cayman Islands Branches The Bank of New York Banque Nationale De Paris Paribas Mellon Bank, N.A. San Paolo IMI Bank Bank Hapolim B.M. Bayerische Landesbank Girozentrale, Cayman Islands Branch KBC Bank, N. V. The Mitsubishi Trust and Banking Corporation, New York Branch UniCredito Italino S.p.A. Schedule A-1 EXHIBIT H-1 [FORM OF OPINION OF ASSISTANT GENERAL COUNSEL TO HUGHES] [Letterhead of Hughes Electronics Corporation] To: The Banks listed on Schedule A hereto and Citicorp USA, Inc., as Administrative Agent Re: SurFin Ltd. Credit Agreement dated as of June 3, 1999 ----------------------------------------- Gentlemen: I am the Assistant General Counsel of Hughes Electronics Corporation, a Delaware corporation ("Hughes"), in connection with the guaranty (the "Guaranty"), dated the date hereof, executed and delivered by Hughes pursuant to and in the form or Exhibit D to that certain Credit Agreement dated as of June 3, 1999 (the "Credit Agreement") by and among SurFin Ltd., an international business company organized and existing under the laws of the Bahamas (the "Borrower"), the Designated Subsidiaries (the "Designated Subsidiaries"), the banks named therein (the "Banks"), Bank of America National Trust and Savings Association, as Syndication Agent, Deutsche Bank AG, New York and Cayman Islands Branches, as Documentation Agent, and The Chase Manhattan Bank, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York, and Westdeutsche Landesbank Girozentrale, New York and Cayman Islands Branches, as Senior Managing Agents, and Citicorp USA, Inc. as administrative agent for the Banks (in such capacity "Administrative Agent"). Capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement. This opinion is rendered to you pursuant to Section 5.1(a)(vi)(D) of the Credit Agreement. As Assistant General Counsel to Hughes, I have caused to be made such legal and factual examinations and inquiries, including an examination of originals or copies, certified or otherwise identified to my satisfaction as authentic, of such corporate records, agreements, instruments and other documents as I have deemed necessary or appropriate for the purposes of this opinion. I have caused to be obtained such certificates and other assurances (copies of which have been delivered to you) from public officials and officers and other employees of Hughes as I considered necessary or appropriate for the purpose of rendering this opinion. I have assumed the genuineness of all signatures (except that of Hughes), the authenticity of all documents submitted to me as originals, and the conformity with the originals of all documents submitted to me as copies. Based upon the foregoing and in reliance thereon, and subject to the qualifications, limitations and assumptions set forth herein, I am of the opinion that, as of the date hereof: 1. Hughes is a corporation duly incorporated and validity existing as a corporation in good standing under the laws of the State of Delaware, with full corporate power and authority to own and lease its properties and conduct its business as presently owned and conducted. H1-1 2. Hughes is duly qualified to do business as a foreign corporation in good standing in the State of California. 3. Hughes has full corporate power and authority to guarantee the Borrower's and the Designated Subsidiaries' obligations under the Credit Agreement, to execute and deliver the Guaranty and to perform its obligations thereunder. 4. All corporate action required to be taken by Hughes for the authorization, execution and delivery of the Guaranty by Hughes and the performance by Hughes of its obligations thereunder has been duly taken. 5. The Guaranty has been duly executed and delivered by Hughes and is a valid and binding agreement of Hughes, enforceable against Hughes in accordance with its terms, subject to the limitations, qualifications, exceptions and assumptions set forth below. 6. To my knowledge, after causing to be conducted such legal and factual examination and inquiries and causing to be conducted such discussions with and obtaining such certificates or other confirmations from officers and other employees of Hughes as I considered appropriate in the circumstances, no consent, permission, authorization, order or license of any United States federal or New York governmental authority is necessary in connection with the execution and delivery of the Guaranty by Hughes and Hughes' performance of its obligations under the Guaranty. 7. There is no provision of the Certificate of Incorporation or the Bylaws of Hughes which would be contravened by the execution and delivery of the Guaranty by Hughes or by the performance by Hughes of its obligations under the Guaranty. 8. Hughes is not an "investment company" as defined in the Investment Company Act of 1940, as amended. 9. To my knowledge, after causing to be conducted such legal and factual examination and inquiries and causing to be conducted such discussions with and obtaining such certificates or other confirmations from officers and other employees of Hughes as I considered appropriate in the circumstances, no consent or approval of any trustee or holder of any material indebtedness of Hughes is necessary in connection with the execution and delivery of the Guaranty by Hughes and Hughes' performance of its obligations under the Guaranty. 10. There is no provision of any indenture or material agreement for borrowed money to which Hughes is a party or under which Hughes is obligated, and of which I am aware, after causing to be conducted such legal and factual examinations and inquiries and causing to be conducted such discussion with and obtaining such certificates or other confirmations from officers and other employees of Hughes as I considered appropriate in the circumstances, which would be contravened by the execution and delivery of the Guaranty by Hughes or by the performance by Hughes of its obligations under the Guaranty. 11. To my knowledge, after causing to be conducted such legal and factual examinations and inquiries and causing to be conducted such discussions with and obtaining such certificates or other confirmations from officers and other employees of Hughes as I H1-2 considered appropriate in the circumstances, there is no judgment, decree or order of any court or governmental agency binding on Hughes which would be contravened by the execution and delivery of the Guaranty by Hughes and Hughes' performance of its obligations under the Guaranty. The opinion expressed in paragraph 5 is subject to the following limitations, qualifications, exceptions and assumptions: (a) the enforcement of the Guaranty may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws or by equitable principles relating to or limiting the rights of creditors generally; (b) the use of the term enforceable shall not imply any opinion as to the availability of equitable remedies; (c) The unenforceability under certain circumstances, under New York or federal law or court decisions, of provisions expressly or by implication waiving broadly or vaguely stated rights, unknown future rights, defenses to obligations or rights granted by law, where such waivers are against public policy or prohibited by law; (d) The unenforceability under certain circumstances of provisions to the effect that rights or remedies are not exclusive, that every right or remedy is cumulative and may be exercised in addition to or with any other right or remedy, that election of a particular remedy or remedies does not preclude recourse to one or more other remedies or that failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any such right or remedy; (e) The unenforceability under certain circumstances of provisions indemnifying a party against liability for its own wrongful or negligent acts or where such indemnification is contrary to public policy or prohibited by law; and (f) The enforceability under certain circumstances of provisions imposing penalties, forfeitures, late payment charges or an increase in interest rate upon delinquency in payment or the occurrence of a default. To the extent that the obligations of Hughes may be dependent upon such matters, I assume for purposes of this opinion that each of the Banks is duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization; that each of the Banks is duly qualified to engage in the transaction covered by this opinion; that the Credit Agreement has been duly authorized, executed and delivered by each of the Banks and that the Credit Agreement constitutes the valid and binding obligation of each of the Banks, enforceable in accordance with its terms; and that each of the Banks has the requisite corporate or organizational and legal power and authority to own its properties, to carry on its business as now being conducted and to perform its obligations under the Credit Agreement, including, without limitation, to make the loans under the Credit Agreement. I am not expressing any opinion as to the effect of or the compliance by any Bank with any state or federal laws or regulations applicable to the transactions because of the nature of its respective business. H1-3 I am a member of the bar of the State of California. Subject to the limitations set forth herein, I am opining herein as to the effect on the subject transaction only of the federal laws of the United States and the General Corporation Law of the State of Delaware. In this regard, I note that the Credit Agreement and the Guaranty contain provisions to the effect that the laws of jurisdictions other than those of the State of California are intended to be governing. For purposes of the opinions expressed herein I have assumed, with your consent, without any independent investigation, that the laws of all jurisdictions that may govern the Credit Agreement and the Guaranty other than those of the State of California are identical in all relevant respects to the laws of the State of California. Except as expressly noted, I have not considered, and express no opinion on, the laws of any other jurisdiction. This opinion is rendered to the Banks and Administrative Agent and is solely for their benefit in connection with the above transaction. This opinion may not be relied upon by the Banks or Administrative Agent for any other purpose, or furnished to, quoted to or relied upon by any other person, firm or corporation for any purpose without my prior written consent. You may, however, deliver a copy of this opinion to permitted assignees of all or a portion of a Bank's rights and obligations under the Credit Agreement in connection with such assignment and such assignees may rely on this opinion. This opinion may also be disclosed to regulatory or other governmental authorities having jurisdiction over you requesting (or requiring) such disclosure. Very truly yours, H1-4 SCHEDULE A Citibank, N.A. Bank of America National Trust and Savings Association Deutsche Bank AG New York and Cayman Islands Branches The Chase Manhattan Bank The First National Bank of Chicago Morgan Guaranty Trust Company of New York Westdeutsche Landesbank Girozentrale- New York and Cayman Islands Branches The Bank of New York Banque Nationale De Paris Paribas Mellon Bank, N.A. San Paolo IMI Bank Bank Hapolim B.M. Bayerische Landesbank Girozentrale, Cayman Islands Branch KBC Bank, N. V. The Mitsubishi Trust and Banking Corporation, New York Branch UniCredito Italino S.p.A. Schedule A-1 EXHIBIT H-2 [FORM OF OPINION OF COUNSEL TO DARLENE] [THE LETTERHEAD OF FOREIGN COUNSEL] ____________, 1999 Citicorp USA, Inc., as Administrative Agent [Address of Agent] and The Banks Listed on Schedule A Hereto Re: Credit Agreement dated as of June 3, 1999 among SurFin Ltd., Dish Placement Services, Ltd., White Holding B.V., the Banks named therein, Bank of America National Trust and Savings Association, as Syndication Agent, Deutsche Bank AG, New York and Cayman Islands Branches, as Documentation Agent, and The Chase Manhattan Bank, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York, and Westdeutsche Landesbank Girozentrale, New York and Cayman Islands Branches, as Senior Managing Agents, and Citicorp USA, Inc., as Administrative Agent Ladies and Gentlemen: 1. We have acted as Cayman Islands counsel to Darlene Investments LLC, an exempted company organized and existing under the laws of the Cayman Islands ("Guarantor"), in connection with that certain Guaranty (the "Guaranty") dated the date hereof, in the form of Exhibit E to the Credit Agreement. This opinion is rendered to you in compliance with subsection 5.1(a)(vi)(E) of the Credit Agreement. 2. Capitalized terms used herein without definition have the same meanings as in the Credit Agreement. 3. For the purposes of this opinion, we have examined and relied upon the following documents: (i) an execution copy of the Credit Agreement; (ii) a copy of the Guaranty; (iii) a certified copy of the Certificate of Incorporation of the Guarantor; H2-1 (iv) certified copies of the Memorandum and Articles of Association of the Guarantor adopted by special resolution on 13th December 1995 and amended by special resolutions on 14th August 1996 and 28th April 1999 (the "Memorandum and Articles"); (v) the minute book and statutory registers of the Guarantor including resolutions of the Directors of the Guarantor (the "Directors") dated June 3, 1999 and resolutions of the shareholders of the Guarantor dated June 3, 1999; (vi) the cause list kept at the Clerk of the Courts' office in the Cayman Islands as at June ___, 1999; (vii) a certificate of good standing in respect of the Guarantor dated [____], 1999 and issued by the Registrar of Companies of the Cayman Islands; and (viii) a certificate of the Directors dated June 3, 1999 (the "Directors' Certificate"). 4. This opinion is based solely on the facts subsisting at the date hereof and of which we are aware. We are qualified to advise as to Cayman Islands law only and our opinion relates solely to the laws of the Cayman Islands in force at the date hereof and as currently applied by the courts of the Cayman Islands. We have not, for the purposes of this opinion, made any investigation of the laws, rules or regulations of any other jurisdiction, including, but not limited to, the laws of the State of New York and federal laws of the United States of America. 5. In giving this opinion, we have relied upon the accuracy of the Directors' Certificate without further verification and upon the following assumptions which we have not independently verified: (i) The genuineness of all seals and signatures on all documents which, or copies of which, were examined by us and the genuineness of all such documents submitted to us as originals and the conformity with their respective originals of all such documents submitted to us as copies; (ii) The Memorandum and Articles reviewed by us are the Memorandum and Articles of Association of the Guarantor in force on the date hereof; (iii) The statutory registers and minute books of the Guarantor examined by us for the purposes of this opinion were true, complete and up to date at the time of our examination; (iv) To the extent that any of the matters to which this opinion relates depend on the capacity, authority or legal right of parties under relevant laws and regulations, the capacity, power, authority and legal right of all parties under all relevant laws and regulations (other than, in relation to the Guarantor only, the laws and regulations of the Cayman Islands) to enter into, execute and perform their respective obligations under the Credit Agreement and Guaranty; H2-2 (v) To the extent that any of the matters to which this opinion relates depend on (a) the due authorization, execution and delivery by the other parties to the Credit Agreement or the Guaranty or (b) the enforceability thereof in accordance with their respective terms under the laws of New York and other relevant laws, rules or regulations, each of the Credit Agreement (in the form of the execution copy examined by us) and Guaranty has been duly authorized, executed and delivered by or on behalf of each of the parties thereto (other than in the case of the Guaranty only, the Guarantor) and constitutes the legal, valid and binding obligations of the parties thereto, enforceable in accordance with their respective terms under the laws of New York and all other relevant laws, rules and regulations (other than, in the case of the Guaranty only, the laws of the Cayman Islands); (vi) The choice of New York law as the governing law of each of the Credit Agreement and the Guaranty has, in each case, been made in good faith and will, in each case, be regarded as a valid and binding selection which be upheld by the courts of New York, the United States federal courts and the courts of any other relevant jurisdiction (other than, in the case of the Guaranty only, the courts of the Cayman Islands); (vii) There is no applicable provision of the laws or regulations of any jurisdiction (other than, in relation to the Guaranty only, the Cayman Islands) or any public policy in any jurisdiction (including the Cayman Islands) which would be or, as the case may be, has been contravened by the execution or delivery of the Credit Agreement and the Guaranty and, insofar as any obligation expressed to be incurred under the Guaranty is to be performed in or is otherwise subject to any applicable laws of any jurisdiction other than the Cayman Islands, its performance will not be illegal or ineffective by virtue of the laws of that jurisdiction; (viii) All authorizations, approvals, consents, licenses and exemptions of any government or any agency or department thereof or any other person required by, and all requirements of, each of the parties to the Credit Agreement and the Guaranty (other than, in the case of the Guaranty only and in the case of the laws and regulations of the Cayman Islands only, the Guarantor) for the legality, validity, enforceability, proper performance and observance and admissibility in evidence of each of the Credit Agreement and the Guaranty have been or will have been obtained or fulfilled and are or will remain in full force and effect and any conditions to which they are subject have been satisfied or waived by the parties entitled to the benefit thereof; and (ix) All notarizations, consularizations, filings, recordings, registrations and enrollments of each of the Credit Agreement and the Guaranty with any court or authority of or in any jurisdiction outside the Cayman Islands and all payments outside the Cayman Islands of stamp duty, registration or other tax on or in relation to the Credit Agreement and the Guaranty that are necessary in order to ensure the legality, validity, enforceability or admissibility in evidence of either of the Credit Agreement and the Guaranty have been made and/or paid in relation to the same. 6. Based upon and subject to the foregoing, and subject to any matters not disclosed to us and to the assumptions and qualifications hereinbefore and hereinafter set out, we are of the opinion that: H2-3 (i) The Guarantor is an exempted company with limited life duly incorporated, validly existing and in good standing under the laws of the Cayman Islands with full corporate power and authority to carry out any object not prohibited by The Companies Law (1998 Revision) or any other law; (ii) The Guarantor has full corporate power and authority to execute, deliver and perform its obligations under the Guaranty; (iii) The execution, delivery and performance of the Guaranty have been duly authorized by all necessary corporate action by the Guarantor, and the Guaranty has been duly executed by the Guarantor. (iv) No constitutional provision, law, ordinance or decree of the Cayman Islands or any government agency or department of the Cayman Islands and no provision of the Memorandum and Articles of Association of the Guarantor is or will be contravened by the execution and delivery of the Guaranty or the performance and observance of the terms thereof by the Guarantor; (v) It is not necessary or advisable to ensure the enforceability or admissibility in evidence in the Cayman Islands of the Guaranty that it be notarized, filed, recorded, registered or enrolled in any court, public authority or elsewhere in the Cayman Islands; (vi) The choice by the parties to the Guaranty of the laws of the State of New York as the governing law of the Guaranty would be recognized and given effect by the courts of the Cayman Islands; (vii) Nothing under Cayman Islands law prevents the submission to jurisdiction by the Guarantor, the appointment of the agent for service of process by Guarantor and the designation of the agent for service of process being valid and effective and binding on the Guarantor; (viii) The obligations of the Guarantor under the Guaranty are enforceable by the Administrative Agent against the Guarantor in accordance with its terms in a proceeding at law in the courts of the Cayman Islands; and (ix) There is no statutory enforcement in the Cayman Islands of judgements obtained in a state or United States federal court in the State of New York or the United States of America but such a judgment will be actionable in the courts of the Cayman Islands on the principle that a judgement of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgement has been given, provided that: (a) the foreign court had jurisdiction to pronounce the judgement; (b) the judgement is final and conclusive and is for a definite liquidated sum of money not being in respect of taxes or a fine or other penalty; and (c) the judgement was not obtained by fraud or in proceedings which were contrary to natural justice or in any other manner contrary to the laws or public policy of H2-4 the Cayman Islands and the judgement is not of a kind, the enforcement of which is contrary to the laws or public policy of the Cayman Islands. 7. The foregoing opinions are subject to the following qualifications, limitations and reservations: (i) The term "enforceable" and its cognates, as used in this opinion, mean that the obligations assumed under the Guaranty are of a type which the courts of the Cayman Islands enforce. It does not mean that those obligations will necessarily be enforced in all circumstances. For example: (a) Enforcement of obligations and the priority of obligations may be limited by bankruptcy, insolvency, liquidation, reorganization, moratorium, reconstruction or other similar laws, rules or regulations of general application relating to or affecting the rights of creditors or by prescription or lapse of time; (b) Enforcement may be limited by general principles of equity, and in particular the availability of certain equitable remedies such as injunction and specific performance will be at the discretion of the courts and, for example, a court might make an award of damages where specific performance of an obligation or some other equitable remedy is sought but the courts considers damages to be an adequate remedy; (c) Claims may become barred under the statutes of limitation or may be or become subject to defences of set off or counterclaim; (d) Where obligations are to be performed in a jurisdiction outside the Cayman Islands, they may not be enforceable in the Cayman Islands to the extent that performance would be illegal under the laws or contrary to the public policy of that other jurisdiction; (e) The Cayman Islands court has jurisdiction to give judgement in the currency of the relevant obligation and statutory rates of interest payable upon judgements given after 1st June, 1995 will vary according to the currency of the judgement. In the event that the Guarantor becomes insolvent and is made subject to a liquidation proceeding, the Cayman Islands court is likely to require all debts to be proved in a common currency, which is likely to be the "functional currency" of the Guarantor determined in accordance with applicable accounting principles; currency indemnity provisions have not been tested, so far as we are aware, in the courts of the Cayman Islands; (f) A certificate, determination or calculation of any party to the Credit Agreement or the Guaranty as to any matter provided therein might be held by a Cayman Islands court not to be conclusive, final and binding if, for example, it could be shown to have an unreasonable or arbitrary basis or in the event of manifest error; (g) In principle a Cayman Islands' court will award costs and disbursements in litigation in accordance with contractual provisions in this regard but the applicable rule of court (GCR Order 62, rule 2) has been in force only since 1st June, 1995 and there H2-5 remains some uncertainty as to the way in which it will be applicable in practice. Whilst it is clear that costs incurred prior to judgement can be recovered in accordance with the contract, it is likely that post-judgement costs will be recoverable, if at all, in accordance with the scales laid down in the Grand Court (Taxation of Costs) Rules 1995; (h) Under Article 70 of the Guarantor's Articles of Association, all cheques, promissory notes, drafts, bills of exchange, other negotiable instruments and other obligations of the Guarantor in an amount that exceeds $2.25 million must be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, by one signatory designated by the Bessemer Designees (as defined in the Articles of Association of the Guarantor); (ii) The severability of any provisions of the Guaranty which are illegal, invalid or unenforceable under the laws of any jurisdiction is, as a matter of Cayman Islands law, at the discretion of the courts; (iii) Where under the Guaranty any of the parties is vested with a discretion or may determine a matter in its opinion, Cayman Islands law may require that such discretion is exercised reasonably or that such opinion is based on reasonable grounds; (iv) Stamp duty will be payable if the Credit Agreement or the Guaranty is executed in, brought to or produced before a court of the Cayman Islands. At current rates, in such circumstances, stamp duty of CI$2.00 will be payable on the Credit Agreement and CI$6.00 will be payable on the Guaranty; (v) Whereas our investigation of the minute book and statutory registers of the Guarantor did not indicate that any steps had been taken for the voluntary winding up or reorganization of he Guarantor, and our examination of the cause list kept at the Clerk of the Court's office in the Cayman Islands on June __, 1999 revealed no winding up petitions against, or reorganization proceedings of the Guarantor, our findings must not be taken as conclusive because minutes of meetings may not have been kept fully up to date and impending winding up or reorganization proceedings may not have, as at such date, been included in the cause list; (vi) Certain provisions, for example, provisions for default interest, default fines or similar provisions, may be unenforceable to the extent that they are considered by a Cayman Islands court to be penal in nature rather than a genuine pre-estimate of loss; and (vii) The courts of the Cayman Islands will not enforce any provisions of any of the Guaranty to the extent that the same may be contrary to public policy in the Cayman Islands. (viii) Any term of the Guaranty herein referred to may be amended orally or by a course of conduct by the parties thereto, notwithstanding any provision to the contrary contained herein; (ix) We make no comment with regard to the references to foreign statutes in the Guaranty; H2-6 (x) We express reservations regarding the validity of any expressed undertaking of a company which purports to prevent it from exercising its statutory powers under The Companies Law (1998 Revision), (such as for example to prevent it from amending or altering its Memorandum and Articles of Association or its share capital); (xi) To maintain the Guarantor in good standing under the laws of the Cayman Islands, annual filing fees must be paid and returns made to the Registrar of Companies. A failure to pay annual return fees in respect of the Guarantor will result in the Guarantor being struck from the Register of Companies whereupon its assets will vest in the Cayman Islands government and all unauthorized dealings therewith will become illegal; (xii) Cayman Islands conflict of law principles are derived from English common law and in the Cayman Islands, as in England, the concept of governing law does not imply that all matters pertaining to the contract or instrument (for example the assignability of choses in action constituted by another system of law) will necessarily be determined exclusively by the governing law. A Cayman Islands court may not apply the laws of another jurisdiction if to do so would be contrary to the laws or public policy of the Cayman Islands; and (xiii) A court may stay proceedings if concurrent proceedings are being brought elsewhere; (xiv) To the extent that the obligations of the Guarantor under the Guaranty mentioned herein involve the government of any country which is currently the subject of United Nations sanctions (namely Iraq, Libya, Rwanda, Sierra Lcone and parts of former Yugoslavia, and each an "Affected Country"), any person or body resident in, incorporated in or constituted under the laws of any Affected Country or exercising public functions in any Affected Country or any person or body controlled by any of the foregoing or by any person acting on behalf of any of the foregoing, they may be subject to restrictions pursuant to such sanctions as implemented under the laws of the Cayman Islands. This opinion is rendered only to Administrative Agent and Banks and is solely for their benefit in connection with the above transactions. This opinion may not be relied upon by Administrative Agent or Banks for any other purpose, or quoted to or relied upon by any other person, firm or corporation for any purpose without our prior written consent. You may, however, deliver a copy of this opinion to permitted assignees of all or a portion of a Bank's rights and obligations under the Credit Agreement in connection with such assignment and such assignees may rely hereon. This opinion may also be disclosed to regulatory or other governmental authorities having jurisdiction over you requesting (or requiring) such disclosure. Very truly yours, H2-7 SCHEDULE A Citibank, N.A. Bank of America National Trust and Savings Association Deutsche Bank AG New York and Cayman Islands Branches The Chase Manhattan Bank The First National Bank of Chicago Morgan Guaranty Trust Company of New York Westdeutsche Landesbank Girozentrale- New York and Cayman Islands Branches The Bank of New York Banque Nationale De Paris Paribas Mellon Bank, N.A. San Paolo IMI Bank Bank Hapolim B.M. Bayerische Landesbank Girozentrale, Cayman Islands Branch KBC Bank, N. V. The Mitsubishi Trust and Banking Corporation, New York Branch UniCredito Italino S.p.A. Schedule A-1 EXHIBIT I [FORM OF OPINION OF O'MELVENY & MYERS LLP AS OF THE CLOSING DATE] _____________, 1999 Citicorp USA, Inc., as Administrative Agent 2 Penns Way Suite 200 New Castle, Delaware 19720 and The Banks Party to the Credit Agreement Referred to Below Re: Credit Agreement dated as of June 3, 1999 among SurFin Ltd., the Designated Subsidiaries, the Banks named therein, Bank of America National Trust and Savings Association, as Syndication Agent, Deutsche Bank AG, New York and Cayman Islands Branches, as Documentation Agent, and The Chase Manhattan Bank, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York, and Westdeutsche Landesbank Girozentrale, New York and Cayman Islands Branches, as Senior Managing Agents, and Citicorp USA, Inc., as Administrative Agent ------------------------------ Ladies and Gentlemen: We have participated in the preparation of the Credit Agreement dated as of June 3, 1999 (the "Credit Agreement"; capitalized terms defined therein and not otherwise defined herein are used herein as therein defined) among SurFin Ltd. (the "Borrower"), the Designated Subsidiaries (the "Designated Subsidiaries" and together with the Borrower the "Obligors"), the Banks named therein (the "Banks"), Bank of America National Trust and Savings Association, as Syndication Agent, Deutsche Bank AG, New York and Cayman Islands Branches, as Documentation Agent, and The Chase Manhattan Bank, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York, and Westdeutsche Landesbank Girozentrale, New York and Cayman Islands Branches, as Senior Managing Agents, and Citicorp USA, Inc., as Administrative Agent, and have acted as special counsel for the Administrative Agent for the purpose of rendering this opinion pursuant to Section 5.1(a)(vii) of the Credit Agreement. We have participated in various conferences and telephone conferences with representatives of the Borrower, the Designated Subsidiaries and the Administrative Agent and conferences and telephone calls with counsel to the Borrower and Hughes, and with your I-1 representatives, during which the Credit Agreement and related matters have been discussed, and we have also participated in the meeting held on the date hereof (the "Closing") incident to the effectiveness of the Credit Agreement. We have reviewed the forms of the Credit Agreement and the exhibits thereto, and the opinions of Graham, Thompson & Company], Bahamas counsel to the Borrower, Wilmer, Cutler & Pickering, New York counsel to the Borrower, and Keith U. Landenberger, Assistant General Counsel of Hughes (the "Opinions"), and officers' certificates and other documents delivered at the Closing. We have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals or copies, the due authority of all persons executing the same, and we have relied as to factual matters on the documents which we have reviewed. On the basis of such examination, our reliance upon the assumptions contained herein and our consideration of those questions of law we considered relevant and subject to the limitations and qualifications in this opinion, we are of the opinion that: 1. The Credit Agreement and the Hughes Guaranty each constitutes the legally valid and binding obligations of the Obligors and Hughes, respectively, enforceable against the Obligors and Hughes, respectively in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally (including, without limitation, fraudulent conveyance laws) and by general principles of equity including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law. In giving the foregoing opinion, we have assumed, without independent investigation, that each of the Credit Agreement and the Hughes Guaranty has been duly authorized by all necessary corporate action on the part of each of the Obligors and Hughes, respectively, and has been duly executed and delivered by each of the Obligors and Hughes, respectively. 2. The Opinions are satisfactory in form to us and, in our opinion, you are justified in relying thereon. Our opinions in paragraph 1 above as to the enforceability of the Credit Agreement and the Hughes Guaranty are subject to: (a) public policy considerations, statutes or court decisions that may limit the rights of a party to obtain indemnification against its own gross negligence, willful misconduct or unlawful conduct; and (b) the unenforceability under certain circumstances of waivers of rights granted by law where the waivers are against public policy or prohibited by law. We express no opinion as to the effect of non-compliance by you with any state or federal laws or regulations applicable to the transactions contemplated by the Credit Agreement because of the nature of your business. I-2 The law covered by this opinion is limited to the present federal law of the United States and the present law of the State of New York. We express no opinion as to the laws of any other jurisdiction. This opinion is furnished by us as special counsel for the Administrative Agent and may be relied upon by you only in connection with the Credit Agreement. It may not be used or relied upon by you for any other purpose or by any other person, nor may copies be delivered to any other person, without in each instance our prior written consent. You may, however, deliver a copy of this opinion to permitted assignees of all or a portion of a Bank's rights and obligations under the Credit Agreement in connection with such assignment, and such assignees may rely on this opinion as if it were addressed and had been delivered to them on the date of this opinion. This opinion may also be disclosed to regulatory and other governmental authorities having jurisdiction over you requesting (or requiring) such disclosure. Respectfully submitted, I-3 EXHIBIT J ASSIGNMENT AND ACCEPTANCE ------------------------- Dated ___________, _____ Reference is made to the Credit Agreement dated as of June 3, 1999 (as amended from time to time, the "Credit Agreement") among SurFin Ltd., a Bahamas international business company (the "Borrower"), the Designated Subsidiaries (as defined in the Credit Agreement), the Banks (as defined in the Credit Agreement), Bank of America National Trust and Savings Association, as Syndication Agent, Deutsche Bank AG, New York and Cayman Islands Branches, as Documentation Agent, and The Chase Manhattan Bank, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York, and Westdeutsche Landesbank Girozentrale, New York and Cayman Islands Branches, as Senior Managing Agents, and Citicorp USA, Inc., as Administrative Agent for the Banks (the "Administrative Agent"). Terms defined in the Credit Agreement and not defined herein are used herein with the same meaning. ______________ (the "Assignor") and ______________ (the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns without recourse to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the Effective Date (defined below) which represents the percentage interest specified on Schedule 1 of all outstanding rights and obligations under the Credit Agreement, including, without limitation, such interest in the Assignor's Commitment and the Loans owing to the Assignor. After giving effect to such sale and assignment, the Assignee's Commitment, the amount of the Loans owing to the Assignee, and the Termination Date of the Assignee will be as set forth in Section 2 of Schedule 1. In consideration of Assignor's assignment, Assignee hereby agrees to pay to Assignor, on the Effective Date, the amount of $___________ in immediately available funds by wire transfer to Assignor's office at ____________________________. Without limiting the generality of the foregoing, the parties hereto hereby expressly acknowledge and agree that any assignment of all or any portion of Assignor's rights and obligations relating to Assignor's Commitment shall include (i) in the event Assignor is an Issuing Bank with respect to any outstanding Letters of Credit (any such Letters of Credit being "Assignor Letters of Credit"), the sale to Assignee of a participation in the Assignor Letters of Credit and any drawings thereunder as contemplated by Section 2.11(c) of the Credit Agreement and (ii) the sale to Assignee of a ratable portion of any participations previously purchased by Assignor pursuant to said subsection 2.11(c) with respect to any Letters of Credit other than the Assignor Letters of Credit. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit J-1 Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any Designated Subsidiary or any Guarantor or the performance or observance by the Borrower, any Designated Subsidiary or any Guarantor of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an [Eligible Assignee] [Approved Bank Affiliate]; (iv) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank; and (vi) specifies as its Lending Office or Lending Offices (and address for notices) the offices set forth beneath its name on the signature pages hereof. 4. Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, the Assignment and Acceptance will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date of this Assignment and Acceptance shall be the date of acceptance thereof by the Administrative Agent, unless otherwise specified on Schedule 1 hereto (the "Effective Date"). 5. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Bank thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement for periods prior to the Effective Date directly between themselves. 7. The Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. J-2 IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed by their respective officers thereunto duly authorized, as of the date first above written, such execution being made on Schedule 1 hereto. J-3 Schedule 1 to Assignment and Acceptance Dated __________, ____ Section 1. - --------- Percentage Interest _____% Section 2. - --------- Assignee's Commitment: $_____ Aggregate Outstanding Principal Amount of Loans owing to the Assignee: $_____ Loans payable to the Assignee Principal amount: _____ Loans payable to the Assignor Principal amount: _____ Termination Date: __________, _____ Section 3. - --------- Effective Date**: __________, _____ [NAME OF ASSIGNOR] By:_________________ Title: [NAME OF ASSIGNEE] By:_________________ Title: Domestic Lending Office (and address for notices): [Address] Eurodollar Lending Office: [Address] _______________________ ** This date should be no earlier than the date of acceptance by the Agent. Schedule 1-1 Accepted this ____ day of __________, ______ CITICORP USA, INC., as Administrative Agent By:_________________________ Title: SURFIN LTD. By:_________________________ Title: Schedule 1-2 EXHIBIT K [FORM OF L/C REQUEST] L/C REQUEST Pursuant to that certain Credit Agreement dated as of June 3, 1999, as amended, supplemented or otherwise modified to the date hereof (said Credit Agreement, as so amended, supplemented or otherwise modified, being the "Credit Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined), by and among SurFin Ltd., an international business company organized and existing under the laws of the Bahamas (the "Borrower"), the Designated Subsidiaries, the financial institutions listed therein as Banks, , Bank of America National Trust and Savings Association, as Syndication Agent, Deutsche Bank AG, New York and Cayman Islands Branches, as Documentation Agent, and The Chase Manhattan Bank, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York, and Westdeutsche Landesbank Girozentrale, New York and Cayman Islands Branches, as Senior Managing Agents, and Citicorp USA, Inc., as Administrative Agent ("Administrative Agent"), this represents [name of Obligor]'s request for the issuance of a Letter of Credit as follows: 1. Name of Obligor for whose account --------------------------------- Letter of Credit is to be issued: _____________________________ -------------------------------- 2. Issuing Bank: _________________________________ ------------ 3. Date of issuance of Letter of Credit: ________________, ________ ------------------------------------ 4. Type of Letter of Credit: - a. Commercial Letter of Credit (other than ------------------------ a Usance Letter of Credit) - b. Usance Letter of Credit - c. Standby Letter of Credit 5. Face amount of Letter of Credit: $________________________ ------------------------------- 6. Expiration date of Letter of Credit: ________________, ________ ----------------------------------- 7. Attached hereto is an executed application to issue letter of credit in ----------------------------------------------------------------------- the Issuing Bank's standard form setting forth the name and address of the -------------------------------------------------------------------------- beneficiary, together with: -------------------------- - a. the verbatim text of such proposed Letter of Credit - b. a description of the proposed terms and conditions of such Letter of Credit, including a precise description of any documents to be presented by the beneficiary which, if presented by the beneficiary prior to the expiration date of such Letter of Credit, would require the Issuing Bank to make payment (or in the case of a Usance Letter of Credit, accept a draft) under such Letter of Credit. K-1 8. Purpose: The following is a description of the purpose of the proposed ----------------------------------------------------------------------- Letter of Credit: ---------------- ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________. We confirm that, pursuant to Section 5.3 of the Credit Agreement, as of the date hereof: (i) the representations and warranties set out in Section 6 of the Credit Agreement are true and correct in all material respects; (ii) the most current financial statements delivered pursuant to Section 7.5 of the Credit Agreement present fairly the financial position and results of operation and changes in financial position of the Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such statements relate as of the date thereof (subject, in the case of unaudited financial statements, to year end adjustments) and there has been no Material Change since the date thereof; and (iii) no Event of Default or Unmatured Event of Default has occurred and is continuing. DATED: ____________________ [Name of Obligor for whose account Letter of Credit is to be issued] By: _______________________ Title: ___________________ K-2 EX-10.7 7 REVOLV CREDIT AGREE (364 DAY FACILITY) NOV 24, 1999 EXHIBIT 10.7 ================================================================================ Revolving Credit Agreement (364-day Facility) Dated as of November 24, 1999 among Hughes Electronics Corporation The Banks named herein and Bank of America, N.A. as Administrative Agent Citicorp USA, Inc. as Syndication Agent Deutsche Bank AG, New York Branch as Documentation Agent Lead Arrangers and Book Managers: Banc of America Securities LLC and Salomon Smith Barney Inc. Bank of America [LOGO] ================================================================================ SECTION 1 DEFINITIONS 1.1 Definitions.................................................................................. 1 SECTION 2 THE CREDIT 2.1 The Commitments............................................................................. 11 2.2 The Loans................................................................................... 12 2.3 Requests for Base Rate and Eurodollar Loans................................................. 12 2.4 Requests for Bid Rate Loans................................................................. 12 2.5 Interest and Principal on Base Rate Loans................................................... 13 2.6 Interest and Principal on Eurodollar Loans.................................................. 14 2.7 Interest and Principal on Bid Rate Loans.................................................... 14 2.8 Loan Accounts............................................................................... 14 2.9 Master Bid Rate Notes....................................................................... 15 2.10 Conversion of Loans Between Eurodollar Loans and Base Rate Loans and Conversion of Interest Periods of Eurodollar Loans................................................................. 15 2.11 Disbursements and Payments.................................................................. 16 2.12 Facility Fee................................................................................ 17 2.13 Extension of Termination Date............................................................... 17 SECTION 3 PAYMENT OF COSTS AND REDUCTION OF THE COMMITMENT 3.1 Indemnification Upon Failure to Pay Eurodollar Loan or Bid Rate Loan........................ 18 3.2 Increased Costs............................................................................. 18 3.3 Taxes....................................................................................... 19 3.4 Prepayment.................................................................................. 20 3.5 Pro Rata Reduction of Commitments by Borrower............................................... 20 3.6 Reduction of One Bank's Commitment by Borrower.............................................. 20 3.7 Notice of Reductions........................................................................ 21 3.8 Designation of Replacement Bank............................................................. 21 3.9 Effect of Reduction of Commitment........................................................... 21 3.10 Accrued Fees................................................................................ 21 3.11 Survival.................................................................................... 21 SECTION 4 CHANGE IN CIRCUMSTANCES AFFECTING LOANS 4.1 Inability to Determine Eurodollar Rate...................................................... 22 4.2 Illegality.................................................................................. 22 SECTION 5 CONDITIONS PRECEDENT
-1- 5.1 Conditions Precedent to Signing Date........................................................ 23 5.2 Conditions Precedent to Effective Date...................................................... 23 5.3 Conditions Precedent to Loans............................................................... 24 SECTION 6 REPRESENTATIONS AND WARRANTIES 6.1 Authority of Borrower....................................................................... 24 6.2 Binding Obligations......................................................................... 25 6.3 Incorporation of Restricted Subsidiaries.................................................... 25 6.4 No Contravention............................................................................ 25 6.5 Notices..................................................................................... 25 6.6 Financial Statements........................................................................ 25 6.7 ERISA....................................................................................... 25 6.8 Regulation U; Investment Company Act........................................................ 25 6.9 Taxes....................................................................................... 26 6.10 Insurance................................................................................... 26 6.11 Liens....................................................................................... 26 6.12 Litigation.................................................................................. 26 6.13 Environmental Compliance.................................................................... 26 6.14 Year 2000................................................................................... 26 6.15 Disclosure.................................................................................. 27 SECTION 7 AFFIRMATIVE COVENANTS OF BORROWER 7.1 Use of Proceeds of Loans.................................................................... 27 7.2 Management of Business...................................................................... 27 7.3 Notice of Certain Events.................................................................... 27 7.4 Records..................................................................................... 28 7.5 Information Furnished....................................................................... 28 7.6 Execution of Other Documents................................................................ 29 7.7 ERISA....................................................................................... 29 7.8 Administrative Agent's Fees................................................................. 29 7.9 Compliance with Law......................................................................... 29 7.10 Compliance with Agreements.................................................................. 29 7.11 Maintenance of Insurance.................................................................... 30 SECTION 8 NEGATIVE COVENANTS OF BORROWER 8.1 Liens....................................................................................... 30 8.2 Mergers, Liquidations and Sales of Assets................................................... 31 8.3 Defaults.................................................................................... 32 8.4 Compliance with Regulations................................................................. 32 8.5 Financial Covenants......................................................................... 32
-2- SECTION 9 EVENTS OF DEFAULT 9.1 Events of Default........................................................................... 33 9.2 Recovery of Amounts Due..................................................................... 36 9.3 Rights Cumulative........................................................................... 36 SECTION 10 THE BANKS 10.1 Administration of Loan...................................................................... 37 10.2 Representations By Banks.................................................................... 37 SECTION 11 MISCELLANEOUS PROVISIONS 11.1 Amendments and Waivers...................................................................... 37 11.2 Notices..................................................................................... 37 11.3 Waiver...................................................................................... 38 11.4 California Law.............................................................................. 38 11.5 Headings.................................................................................... 38 11.6 Accounting Terms............................................................................ 38 11.7 Counterparts................................................................................ 38 11.8 Written Disclosure.......................................................................... 39 11.9 Singular; Plural............................................................................ 39 11.10 Illegality.................................................................................. 39 11.11 Assignments................................................................................. 39 11.12 Obligations Several......................................................................... 40 11.13 Participations.............................................................................. 40 11.14 Fees and Expenses........................................................................... 41 11.15 Indemnity................................................................................... 41 11.16 Confidentiality............................................................................. 42 11.17 Waiver of Right to Trial by Jury............................................................ 43 11.18 New Banks; Increases in Commitments of Banks................................................ 44
EXHIBITS A-1 Form of Loan Request A-2 Form of Loan Request - Bid Rate Loans B Master Bid Rate Loan Note C Relations Among the Banks and Agents D Addresses and Lending Offices of Banks E Existing Liens F Form of Opinion of General Counsel G Form of Extension Request H Form of Commitment Increase Letter -3- I Compliance Certificate J Form of Assignment and Acceptance SCHEDULE 1 Name of Banks and Commitments -4- REVOLVING CREDIT AGREEMENT (364-DAY FACILITY) THIS REVOLVING CREDIT AGREEMENT (364-DAY FACILITY) ("Agreement") is entered into as of November 24, 1999 (the "Signing Date") among HUGHES ELECTRONICS CORPORATION, a corporation organized and existing under the laws of Delaware ("Borrower"), the banks named herein (collectively, together with any other lenders that become parties hereto pursuant to Section 3.8 or 11.11, the "Banks" and individually a "Bank"), Bank of America, N.A., as administrative agent for the Banks (in such capacity "Administrative Agent"), Citicorp USA, Inc., as Syndication Agent (in such capacity "Syndication Agent") and Deutsche Bank AG, New York Branch, as Documentation Agent (in such capacity "Documentation Agent"). SECTION 1 DEFINITIONS 1.1 Definitions. ----------- "Aggregate Long-Term and Short-Term Commitments" means the Total Commitment plus the "Total Commitment" as defined in the Multi-Year Credit Agreement. "Applicable Amount" means, for the facility fee and Eurodollar Loans, the amount (expressed in basis points per annum) set forth in the chart below opposite the Applicable Level then in effect:
============================================================================ Applicable Amount Applicable Debt Ratings (in basis points per annum) ------------------------------- Level Eurodollar Rate Facility Fee + - ---------------------------------------------------------------------------- 1 *A-/A3 29.5 8.0 - ---------------------------------------------------------------------------- 2 BBB+/Baa1 40.0 10.0 - ---------------------------------------------------------------------------- 3 BBB/Baa2 62.5 12.5 - ---------------------------------------------------------------------------- 4 BBB-/Baa3 82.5 17.5 - ---------------------------------------------------------------------------- 5 BB+/Ba1 105.0 20.0 - ---------------------------------------------------------------------------- 6 **BB/Ba2 150.0 25.0 ============================================================================
* More than or equal to. ** Less than or equal to. -1- Provided that beginning on the Effective Date and continuing so long as the - -------- actual Applicable Level as set forth in the above table is Level 1, Level 2, Level 3 or Level 4, the Applicable Level for purposes of calculating the Applicable Amount shall be deemed to be Level 4 until such time as the principal amount of the Loans and the principal amount of the "Loans", as defined in the Multi-Year Credit Agreement, have been reduced to zero, at which time the Applicable Level shall be determined as set forth in the above table; provided -------- further that so long as the actual Applicable Level as set forth in the above - ------- table is Level 5 or Level 6, the Applicable Level shall be determined as set forth in the above table. "Applicable Level" means the level set forth opposite the Debt Ratings in the definition of Applicable Amount then in effect, subject to the provisos to such definition. Any change in the Applicable Level shall become effective upon any public announcement of any change in any Debt Rating that requires a change in the Level in accordance with the above chart. "Approved Bank Affiliate" means a Person that is a subsidiary of a Bank or of a Person of which a Bank is a subsidiary, and which is either engaged primarily in the business of commercial banking or, if not so engaged, which has been approved by the Borrower and Administrative Agent (provided that Borrower's -------- consent shall not be unreasonably withheld). "Arrangers" means BAS and Salomon Smith Barney Inc. "Attorney Costs" means and includes all fees and disbursements of any law firm or other external counsel and the allocated cost of internal legal services and all disbursements of internal counsel. "Authorized Designee" means the chief executive officer, the vice chairman, the chief financial officer, treasurer or the assistant treasurer of Borrower, or any other officer of Borrower specified as being an Authorized Designee in the certificate delivered pursuant to Section 5.2(c). "Availability Period" means the period commencing on the Effective Date and ending on the Termination Date. "Bank of America" means Bank of America, N.A. in its capacity as a Bank. "BAS" means Banc of America Securities LLC. "Base Rate" means the higher of: (a) the rate of interest publicly announced from time to time by Bank of America as its "reference rate," which is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate; and (b) one-half percent per annum above the Federal Funds Rate. Any change in the reference rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Loan" means a Loan bearing interest based on the Base Rate calculated pursuant to Section 2.5. -2- "Bid Rate" means an interest rate offered by a Bank in its sole discretion and in response to the Borrower's Loan Request for a Bid Rate Loan pursuant to Section 2.4, which interest rate shall include all applicable reserve and other adjustments when being advised by such Bank to Administrative Agent. "Bid Rate Loan" means a Loan bearing interest at a Bid Rate. "Borrowing Date" means a date on which funds are advanced to Borrower by one or more Banks pursuant to a Loan Request. "Business Day" means a day other than a Saturday or Sunday on which banks are open for business in both San Francisco, California and New York, New York. "Commercial Paper" means short term commercial paper (with a maturity date not in excess of 270 days from the date of its issuance) issued by Borrower (a) pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended or modified from time to time, or (b) pursuant to the exemption from registration contained in Section 3(a)(3) of the Securities Act of 1933, as amended or modified from time to time, with respect to which a recognized rating agency has taken this Agreement into account in the rating of such short term commercial paper. "Commitment" of each Bank means the dollar amount set forth opposite such Bank's name on Schedule 1 hereto, as such amount may be reduced or changed pursuant to Sections 3.5 and 3.6. "Commitment Increase Letter" means a letter notifying the Administrative Agent of a Bank's desire to increase its Commitment pursuant to Section 11.18 hereof, in substantially the form of Exhibit H hereto. --------- "Compliance Certificate" means a certificate in the form of Exhibit I, --------- properly completed and signed by Borrower's Treasurer or an Assistant Treasurer. "Consolidated Adjusted Net Worth" means, as of the date of determination thereof, the consolidated stockholders equity of Borrower and its Subsidiaries in accordance with GAAP adjusted by adding back the amount by which such consolidated stockholders equity has been reduced (or by subtracting the amount by which stockholders equity has been increased) on account of (a) changes subsequent to December 31, 1992 in the long term liability of Borrower and its Subsidiaries for post-retirement benefits other than pensions and (b) specified material non-cash adjustments resulting from the adoptions of future pronouncements of the Financial Accounting Standards Board. "Consolidated EBITDA" means, for any period, for Borrower and its Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Consolidated Net Income, (b) Consolidated Interest Charges, (c) the amount of taxes, based on or measured by income, used or included in the determination of such Consolidated Net Income, (d) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income, (e) for each fiscal quarter in the fiscal year ending December 31, 1999, (i) the amount of charges taken in connection with the cancellation of contract with Asia Pacific Mobile Telecommunications, up to -3- an aggregate amount of $92,000,000 for all such fiscal quarters, and (ii) the amount of charges taken in connection with development costs and schedule delays at Hughes Space and Communication up to an aggregate amount of $125,000,000 for all such fiscal quarters, (f) for the last fiscal quarter of the fiscal year ending December 31, 1999, (i) if a non-cash charge is taken in connection with the write-off of equity investment in ICO Global Communications, the amount of such non-cash charge up to an aggregate amount of $62,000,000 and (ii) if a change in business strategy related to DirecTV Japan, Ltd. results in cash and/or non-cash charges, the amount of such cash and/or non-cash charges up to an aggregate amount of $250,000,000, and (g) for each fiscal quarter in the fiscal year ending December 31, 2000, the amount of non-cash charges taken in connection with ICO Global Communications, the Hughes Network Systems wireless business and PanAmSat launch delays, up to an aggregate amount for all such fiscal quarters of (x) $500,000,000 minus (y) the amount of the charge, if any, added pursuant to clause (f)(i) above; minus (h) for each fiscal quarter in the ----- fiscal year ending December 31, 2000, the amount of cash losses (whether or not accounted for as charges under GAAP) in connection with DirecTV Japan, Ltd., but only if such cash losses were reflected in the charges, if any, added pursuant to clause (f)(ii); plus (i) for each fiscal quarter in the fiscal year ending ---- December 31, 2000, if any change in business strategy regarding DirecTV Japan, Ltd. results in a non-cash charge, the amount of such non-cash charge up to an aggregate amount of $150,000,000 minus the amount of non-cash charges, if any, added pursuant to clause (f)(ii) above. "Consolidated Funded Indebtedness" means, as of any date of determination, for Borrower and its Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal amount of all obligations and liabilities, whether current or long-term, for borrowed money (including Loans hereunder), and (b) that portion of obligations with respect to capital leases that are capitalized in the consolidated balance sheet of Borrower and its Subsidiaries in excess of an aggregate amount of $25,000,000. "Consolidated Interest Charges" means, for any period, for Borrower and its Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments, fees, charges and related expenses payable by Borrower and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets and imputed interest associated with the assumption of liabilities relating to programming contracts under purchase accounting in accordance with GAAP, in each case to the extent treated as interest in accordance with GAAP, and (b) the portion of rent payable by Borrower and its Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP. "Consolidated Net Income" means, for any period, for Borrower and its Subsidiaries on a consolidated basis, the net income of Borrower and its Subsidiaries from continuing operations after extraordinary items (excluding gains or losses from Dispositions of assets) for that period. "Consolidated Tangible Net Worth" means, at any date of determination, Consolidated Adjusted Net Worth less the consolidated intangible assets of ---- Borrower and its Subsidiaries, determined in accordance with GAAP. -4- "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "Debt Rating" means, as of any date of determination, the rating as determined by either Standard & Poor's Ratings Group or Moody's Investors Service, Inc. (collectively, the "Debt Ratings"); of (a) the Borrower's senior unsecured long-term debt or (b) if the foregoing debt is not outstanding, then the rating of the Multi-Year Credit Agreement or the implied rating of senior unsecured and non-credit enhanced debt securities, provided that if both ratings -------- in this clause (b) have been issued then both shall apply; or (c) if neither (a) nor (b) apply, then the rating of long-term debt issued by equipment trust guaranteed by Borrower; provided that if a Debt Rating is issued by both of such -------- rating agencies, then the lower of such credit ratings shall apply unless the split in credit ratings is more than one level, in which case the level one level higher than the lower rating shall apply. Initially, the Debt Ratings shall be determined from the certificate delivered pursuant to Section 5.2(d). Thereafter the credit ratings shall be determined from the most recent public announcement of any changes in such credit ratings. "Default Rate" means an interest rate equal to the Base Rate plus the ---- Applicable Amount, if any, applicable to Base Rate Loans plus 2% per annum, to ---- the fullest extent permitted by applicable Laws; provided, however, that (i) -------- ------- with respect to a Eurodollar Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Amount) otherwise applicable to such Loan plus 2% per annum, and (ii) with respect to a Bid Rate Loan the Default Rate shall be an interest rate equal to the interest rate otherwise applicable to such Loan plus 2% per annum. "Effective Date" means the date on or before December 10, 1999 that the conditions set forth in Section 5.2 are satisfied or waived by the Majority Banks. "Eligible Assignee" means a Person which can lawfully fulfill all of the obligations of a Bank hereunder and is (a) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; or (c) any Person engaged primarily in the business of commercial banking and that is a subsidiary of a Bank or of a Person of which a Bank is a subsidiary. "Environmental Laws" means all foreign, federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case relating to environmental, health, safety and land use matters applicable to any property. "ERISA" means the Employee Retirement Income Security Act of 1974, as in effect from time to time. -5- "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with Borrower or any Subsidiary of Borrower within the meaning of Section 414(b), 414(c) or 414(m) of Internal Revenue Code of 1986, as amended. "Eurodollar Banking Day" means a day on which banks are open for business in San Francisco, California, New York, New York and the applicable offshore dollar interbank market and dealing in U. S. Dollar deposits. "Eurodollar Loan" means a Loan at the rate of interest calculated pursuant to Section 2.6. "Eurodollar Rate" means for each Interest Period of a Eurodollar Loan the arithmetic mean of the rates of interest rounded to the nearest 1/100 of one percent as notified to the Administrative Agent by the Reference Banks at which U.S. Dollar deposits for such Interest Period and in an amount comparable to the Principal Amount of such Eurodollar Loan would be offered by such Reference Banks to major banks in the London offshore dollar interbank market upon request of such banks at approximately 11:00 a.m. London time two Eurodollar Banking Days prior to the first day of such Interest Period. "Event of Default" means any event specified in Section 9.1. "Existing Agreements" means (a) the Revolving Credit Agreement (364-Day Facility) dated as of December 5, 1997, as amended, among Borrower, the banks party thereto and Bank of America, N.A. (formerly known as Bank of America National Trust and Savings Association), as agent for such banks; and (b) any Note (as that term is defined in such credit agreement) issued pursuant to such credit agreement. "Extension Request" means a Request for Extension delivered by the Borrower to the Banks to request an extension of the Termination Date in accordance with the provisions of Section 2.13, in substantially the form of Exhibit G hereto. --------- "Federal Funds Rate" means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m. Quotation") for such day under the caption "Federal Funds Effective Rate". If on any relevant day the appropriate rate for such day is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by Administrative Agent. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System, or any successor thereto. -6- "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statements by such other entity as may be in general use by significant segments of the U.S. accounting profession, which are applicable to the circumstances as of the date of determination. "Governmental Authority" means (a) any international, foreign, federal, state, county or municipal government, or political subdivision thereof, (b) any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality, central bank or public body, or (c) any court, administrative tribunal or public utility. "Granting Bank" has the meaning specified in Section 11.11(c). "Interest Payment Date" means, with respect to each Bid Rate Loan and each Eurodollar Loan, the last day of each Interest Period; provided, however, that -------- ------- if any Interest Period (a) in the case of a Bid Rate Loan exceeds 90 days and (b) in the case of a Eurodollar Loan exceeds three months, "Interest Payment Date" shall mean the 90th day and the last day of the third month of such Interest Period, respectively, as well as the last day of the relevant Interest Period; and, with respect to each Base Rate Loan, means the 10th day of each January, April, July, and October and the Termination Date. If any day specified herein is not a Business Day or, in the case of a Eurodollar Loan, a Eurodollar Banking Day, then the relevant Interest Payment Date shall be the next succeeding Business Day or Eurodollar Banking Day, as applicable, except as otherwise provided in the definition of Interest Period. Notwithstanding any other provision herein, interest accruing at the Default Rate shall be payable from time to time at any time upon demand of Administrative Agent. "Interest Period" means: (a) with respect to each Bid Rate Loan, a period of 7 to 180 days as selected by Borrower by a Loan Request delivered to Administrative Agent in accordance with Section 2.4, and (b) with respect to each Eurodollar Loan, a period of one, two, three or six months as selected by Borrower by a Loan Request delivered to Administrative Agent in accordance with Section 2.3, subject to the following: (i) If the term of an Interest Period is not designated, a period of 30 days shall be deemed selected for the relevant Bid Rate Loan and a period of one month shall be deemed selected for the relevant Eurodollar Loan; (ii) The first Interest Period for each Loan shall commence on the date such Loan is disbursed and each succeeding Interest Period for such Loan shall commence on the last day of the preceding Interest Period for such Loan; (iii) In the case of a Bid Rate Loan, if the last day of an Interest Period falls on a day that is not a Business Day, the Interest Period involved shall be extended to the next succeeding Business Day, and the next succeeding Interest Period shall be measured from the last day of the Interest Period as so adjusted; -7- (iv) In the case of a Eurodollar Loan, if the last day of an Interest Period falls on a day that is not a Eurodollar Banking Day, the Interest Period involved shall be extended to the next following Eurodollar Banking Day unless as a result thereof it would fall into the next calendar month, in which case the end of the Eurodollar Interest Period shall be the preceding Eurodollar Banking Day, and in either case the next succeeding Eurodollar Interest Period shall be measured from the last day of the Interest Period as so adjusted; (v) If an Interest Period for a Eurodollar Loan commences on the last Eurodollar Banking Day of a calendar month, it shall end on the last Eurodollar Banking Day of a calendar month; and (vi) No Interest Period shall end on a day later than the Termination Date. "Investment Grade" means a Debt Rating by S&P of BBB- or better and Debt Rating by Moody's of Baa3 or better. "Lending Office" means with respect to any Bank as the context shall require, the branch office of such Bank designated as the Lending Office of such Bank in Exhibit D attached hereto and incorporated herein by reference; or any other branch office or affiliate of such Bank hereafter selected and notified to Borrower and Administrative Agent from time to time by such Bank; provided that -------- any Bank may from time to time by notice to Borrower and Administrative Agent designate separate Lending Offices for its Bid Rate Loans, its Eurodollar Loans and/or its Base Rate Loans, in which case any reference to the Lending Office of such Bank shall be deemed to refer to any or all of such offices, branches or affiliates as the context may require. "Letter Agreement" means that letter agreement among BAS, Administrative Agent and Borrower dated November 3, 1999 specifying Arrangers' and Administrative Agent's compensation for services hereunder as such letter agreement may from time to time be amended, restated, reissued or otherwise modified. "Leverage Ratio" means, as of the end of any fiscal quarter, for the Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA for the period of the four fiscal quarters ended on such date. "Lien" means any trust deed, mortgage, pledge, hypothecation, assignment, security interest, lien, charge or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the lien of an attachment, judgment or execution, or any conditional sale or other title retention agreement, any capitalized lease, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction, but excluding financing statements filed to give notice of leases in the ordinary course of business). "Loan" or "Loans" means the loans described in Section 2, any of which may be at any time Base Rate Loans, Eurodollar Loans or Bid Rate Loans. "Loan Request" means a notice given by Borrower pursuant to Section 2.3 or 2.4. -8- "Majority Banks" means those Banks whose Commitments constitute at least 51% of the Total Commitment as such Total Commitment may be adjusted from time to time pursuant to the terms of this Agreement, or if the Commitments have terminated, those Banks holding at least 51% of the outstanding Loans (other than Bid Rate Loans). "Master Bid Rate Note" means a promissory note of Borrower payable to order of a Bank in substantially the form of Exhibit B hereto in favor of such Bank evidencing the indebtedness of the Borrower to such Bank resulting from a Bid Rate Loan made by such Bank. "Material Adverse Change" means (a) any adverse change which could reasonably be expected to materially impair Borrower's ability to timely and fully perform its obligations under this Agreement or (b) any material adverse change in the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of Borrower and its Subsidiaries, taken as a whole. "Moody's" means Moody's Investors Service, Inc. "Multi-Year Credit Agreement" means the Amended and Restated Revolving Credit Agreement (Multi-Year Facility) dated as of November 24, 1999 among Borrower, the banks named therein, Bank of America, as administrative agent, Morgan Guaranty Trust Company of New York, as syndication agent, and Citicorp USA, Inc. and The Chase Manhattan Bank, as documentation agents, as amended from time to time. "New Bank" or "New Banks" means additional lending institutions added as Banks in accordance with Section 11.18 hereof. "Normal Percentage" means, with respect to each Bank, the percentage under the heading "Normal Percentage" set forth opposite such Bank's name on Schedule 1 hereto, as such amount may be reduced or changed pursuant to Section 3.6 or Section 11.11. "Note" means any promissory note delivered pursuant to Section 2.8 or any Master Bid Rate Note (collectively, the "Notes"). "Notice of Assignment and Acceptance" means a Notice of Assignment and ----------------------------------- Acceptance substantially in the form of Exhibit J. --------- "Person" means any individual, firm, company, corporation, joint venture, joint-stock company, trust, unincorporated organization, Governmental Authority, or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing. "Plan" means any employee benefit pension plan which is subject to the provisions of Title IV of ERISA and which is maintained for employees of Borrower or any Subsidiary. "Principal Amount" means, when used with reference to any Loan, the amount requested in the Loan Request relating thereto and made available to Borrower by the Banks hereunder. -9- "Principal Repayment Date" means, with respect to each Base Rate Loan, the Termination Date, and with respect to each Bid Rate Loan and each Eurodollar Loan, the last day of the Interest Period for such Loan. "Reference Banks" means Bank of America and Citibank, N.A. "Reportable Event" means any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder excluding those events for which the 30-day notice requirement is waived, a withdrawal from a Plan described in Section 4063 of ERISA, or a cessation of operations described in Section 4062(e) of ERISA. "Restricted Subsidiaries" means each Subsidiary (i) having assets exceeding 10% of the Consolidated Tangible Net Worth of Borrower and its Subsidiaries on a consolidated basis or (ii) having operating revenues exceeding 10% of the operating revenues of Borrower and its Subsidiaries on a consolidated basis, in each case as shown on the financial statements dated as of June 30, 1999 and, thereafter, as shown on the audited consolidated financial statements of Borrower and its Subsidiaries as of the end of the fiscal year immediately preceding the date of determination; provided, however, that "Restricted -------- ------- Subsidiary" shall not include any Subsidiary which is a corporation created solely to purchase receivables from Borrower or any of its Subsidiaries, and which would not, in accordance with GAAP, be included in the consolidated financial statements of Borrower. "S&P" means Standard & Poor's Ratings Group. "Shareholders' Equity" means, as of any date of determination for Borrower and its Subsidiaries on a consolidated basis, shareholders' equity as of that date determined in accordance with GAAP. "Signing Date" means the date of this Agreement. "SPC" has the meaning specified in Section 11.11(c). "Subsidiaries" (individually a "Subsidiary") means those corporations or entities of which Borrower owns more than 50% of the voting securities. If Borrower, subject to the terms hereof, permits its ownership to fall to 50% or below of outstanding voting shares of any Subsidiary, such Subsidiary shall thereupon cease to be a Subsidiary for all purposes hereof. "Tax" and "Taxes" mean all taxes, levies, imposts, duties, fees or other charges of whatsoever nature however imposed by any country or any subdivision or authority of or in that country in any way connected with this Agreement or any instrument or agreement required hereunder, and all interest, penalties or similar liabilities with respect thereto, except such taxes as are imposed on or measured by any Bank's net income or capital and franchise taxes, by the country or any subdivision or authority of or in that country in which such Bank's principal office or actual Lending Office is located. "Termination Date" means November 22, 2000; provided, however, that, if any -------- Bank has consented to an Extension Request in accordance with Section 2.13 with regard to the then existing Termination Date, then, subject to Section 2.13(b), the then existing Termination Date -10- as to such Bank shall be automatically extended for 364 days from the then existing Termination Date; provided further, however, that, notwithstanding any ---------------- other provisions of this Agreement to the contrary, the Termination Date shall occur upon the earlier termination in whole of the Commitments pursuant to Section 3.5 or 9.1. "Total Commitment" means the aggregate amount of the Commitments. "Unmatured Event of Default" means an event which with the passage of time or the giving of notice, or both, would become an Event of Default. "Utilization Fee" means the amount (expressed in basis points per annum) set forth in the chart below opposite the Applicable Level then in effect:
================================================================================ Applicable Level Utilization Fee ================================================================================ Level 1 12.5 - -------------------------------------------------------------------------------- Level 2 12.5 - -------------------------------------------------------------------------------- Level 3 12.5 - -------------------------------------------------------------------------------- Level 4 12.5 - -------------------------------------------------------------------------------- Level 5 25.0 - -------------------------------------------------------------------------------- Level 6 25.0 ================================================================================
"Voting Stock" means capital stock of Borrower having voting power under ordinary circumstances to elect directors of Borrower. "Withdrawal Liability" means, as of any determination date, the aggregate amount of the liabilities, if any, pursuant to Section 4201 of ERISA if the Borrower or any ERISA Affiliate made a complete withdrawal from all Plans and any increase in contributions pursuant to Section 4243 or ERISA. SECTION 2 THE CREDIT 2.1 The Commitments. (a) From time to time, during the Availability --------------- Period, each Bank severally agrees to lend to Borrower in U. S. Dollars the amount set forth opposite such Bank's name on Schedule 1 hereto, subject to reduction of such amount at Borrower's option, pursuant to Sections 3.5 and 3.6 or otherwise pursuant to Section 2.1(c). (b) Except as provided in subsection 2.1(d), each Bank shall make available to Borrower Base Rate Loans and Eurodollar Loans up to the amount of such Bank's Commitment. In addition, each Bank may, but shall not be required under any circumstances whatsoever to, make -11- available to Borrower Bid Rate Loans. Except as provided in subsection 2.1(c), the Commitment of any Bank making a Bid Rate Loan shall not be reduced by the amount of any such Loan or Loans made by such Bank or by any other Bank. (c) The Principal Amount of Bid Rate Loans made by any Bank may exceed such Bank's Commitment; provided, however, that the aggregate Principal Amount -------- ------- of all Bid Rate Loans outstanding under this Agreement shall not exceed the Total Commitment. The Total Commitment shall be reduced by the Principal Amount of Bid Rate Loans outstanding so long as such Bid Rate Loans remain outstanding; and the Commitment of each Bank shall be reduced pro rata. (d) During any period of time when Bid Rate Loans are outstanding, additional Eurodollar Loans and Base Rate Loans requested by Borrower shall be allocated among the Banks in accordance with their Normal Percentage as set forth in Schedule 1 and without regard to any Bid Rate Loans such Bank may have outstanding to Borrower. In no event shall Eurodollar Loans, Base Rate Loans and Bid Rate Loans outstanding hereunder exceed the Total Commitment as adjusted from time to time pursuant to this Section 2.1. 2.2 The Loans. Each Loan shall be a Base Rate Loan, a Eurodollar Loan or --------- a Bid Rate Loan and shall be in U. S. Dollars. Each Loan shall be in the minimum amount of $5,000,000 with any additional amounts in integral multiples of $1,000,000. This is a revolving credit, and Borrower may, during the Availability Period, reborrow amounts repaid or prepaid. No Loan nor any part of any Loan shall be repaid except at the times and in the manner expressly provided herein. 2.3 Requests for Base Rate and Eurodollar Loans. Each Base Rate Loan and ------------------------------------------- Eurodollar Loan shall be made upon irrevocable written or telephonic notice, confirmed promptly in writing, substantially in the form of Exhibit A-1 hereto, by Borrower to Administrative Agent received by Administrative Agent not later than 9:00 a.m. California time not less than three (3) Eurodollar Banking Days prior to the Borrowing Date (which must be a Eurodollar Banking Day) of a Eurodollar Loan and not later than 9:00 a.m. California time on the proposed Borrowing Date (which must be a Business Day) of a Base Rate Loan. Upon receipt of a request for a Base Rate Loan and Eurodollar Loan, Administrative Agent shall promptly notify the Banks of the amount, the Interest Period(s), if applicable, and the Borrowing Date requested by Borrower. After giving effect to any borrowing of Eurodollar Loans or any conversion or continuation of Eurodollar Loans, there shall not be more than 10 different Interest Periods for Eurodollar Loans and Bid Rate Loans in the aggregate at any time. 2.4 Requests for Bid Rate Loans. (a) Each Bid Rate Loan shall be made --------------------------- upon irrevocable written or telephonic notice, confirmed promptly in writing, substantially in the form of Exhibit A-2 hereto, by Borrower and must be received by Administrative Agent not later than 9:00 a.m. California time one Business Day prior to the Borrowing Date for such Loan, specifying the Borrowing Date (which must be a Business Day), the amount, and the Interest Period. In requesting a Bid Rate Loan, Borrower may specify up to a maximum of three alternative Interest Periods for the Bid Rate Loan. After giving effect to any borrowing of Bid Rate Loans, there shall not be more than 10 different Interest Periods for Bid Rate Loans and Eurodollar Loans in the aggregate at any one time. -12- (b) Upon receipt of a request for a Bid Rate Loan pursuant to paragraph (a) above, Administrative Agent shall promptly notify the Banks of the amount, the Interest Period(s) and the Borrowing Date requested by Borrower. If Bank of America elects to advance a Bid Rate Loan it shall notify Borrower and Administrative Agent of the amount, the Interest Period(s) and the Bid Rate (with any fraction of a percentage expressed as a decimal to the nearest 1/10,000 of one percent) upon which Bank of America desires to advance such a Bid Rate Loan by 7:00 a.m. California time on such Borrowing Date. By 7:15 a.m. California time on the Borrowing Date, each other Bank shall notify Administrative Agent whether or not it will submit an offer in response to Borrower's request for a Bid Rate Loan and each Bank submitting an offer shall notify Administrative Agent of the amount, the Interest Period(s) and the Bid Rate (with any fraction of a percentage expressed as a decimal to the nearest 1/10,000 of one percent) upon which such Bank desires to advance a Bid Rate Loan. By 7:30 a.m. California time on the Borrowing Date Administrative Agent shall give notice to Borrower, of the amount, the Interest Period and the Bid Rate upon which each Bank desires to advance a Bid Rate Loan. Borrower shall, before 7:45 a.m. California time on such Borrowing Date, elect which of the offered Bid Rate Loans it desires to accept and notify Administrative Agent of each offer that is being accepted by Borrower. Such acceptance by Borrower shall be irrevocable. If Borrower accepts any of the offers for Bid Rate Loans, Borrower must accept offers strictly based upon pricing and no other criteria. If two or more Banks submit offers at identical pricing and Borrower accepts any of such offers but does not wish to borrow the total amount offered by such Banks, Borrower shall accept offers from all of such Banks on amounts allocated among them pro rata (in multiples of $1,000,000) according to the amounts offered by such Banks. (c) If Borrower accepts one or more of the offers made by any Bank or Banks pursuant to subsection (b) above, Administrative Agent shall, by 8:15 a.m. California time on such Borrowing Date, notify each Bank as to the identity of each Bank which is to make a Bid Rate Loan, the amount of the Loan to be made by each Bank, the Interest Period, and the Bid Rate applicable to each such Loan. Administrative Agent shall also notify each Bank by 8:15 a.m. California time on such Borrowing Date if Administrative Agent has either received no offers in response to Borrower's Loan Request for a Bid Rate Loan or if Borrower has elected not to accept any of the offers received. (d) Each Bank whose offer for a Bid Rate Loan has been accepted pursuant to Section 2.4(b) shall determine for itself whether the conditions precedent in Section 5.2 have been or will be satisfied on the Borrowing Date. On or before 11:00 a.m. California time on the Borrowing Date, each such Bank's Lending Office will make available to Administrative Agent the principal amount of the Bid Rate Loan in immediately available funds and Administrative Agent shall promptly credit Borrower's account at Administrative Agent in immediately available funds. 2.5 Interest and Principal on Base Rate Loans. Subject to Section 2.11(f) ----------------------------------------- herein, the outstanding Principal Amount of each Base Rate Loan shall bear interest until payment is due in full (computed daily on the basis of a 365 or 366, as the case may be, day year and actual days elapsed) at the rate per annum equal to the Base Rate. Borrower shall pay interest on each Base Rate Loan on each Interest Payment Date for the interest accruing since the previous Interest Payment Date on such Base Rate Loan. Borrower shall repay in full the Principal Amount of each Base Rate Loan on the Termination Date or as provided in Section 2.10(c). -13- 2.6 Interest and Principal on Eurodollar Loans. (a) Subject to Section ------------------------------------------ 2.11(f) herein, the outstanding Principal Amount of each Eurodollar Loan shall bear interest until payment is due in full (computed daily on the basis of a three hundred sixty (360) day year and actual days elapsed) at a rate per annum equal to the Eurodollar Rate plus the Applicable Amount; plus, at all times ---- ---- until such time as the principal amount of the Loans and the principal amount of the "Loans," as defined in the Multi-Year Credit Agreement, have been reduced to zero, and thereafter with respect to each day on which the aggregate amount of outstanding Loans plus the aggregate amount of outstanding "Loans", as defined in the Multi-Year Credit Agreement, exceeds 33% of the Aggregate Long-Term and Short-Term Commitments, the Utilization Fee (computed daily on the basis of a three hundred sixty (360) day year and actual days elapsed). Borrower shall pay interest and the Utilization Fee on each Eurodollar Loan on each Interest Payment Date for such Eurodollar Loan. Borrower shall repay in full the Principal Amount of each Eurodollar Loan on the last day of the Interest Period for such Eurodollar Loan or as provided in Section 2.10(c). (b) If any Reference Bank's Commitment shall terminate (otherwise than on termination of all the Commitments), or for any reason whatsoever the Reference Bank shall cease to be a Bank hereunder, that Reference Bank shall thereupon cease to be a Reference Bank, and the Eurodollar Rate shall be determined on the basis of the rates as notified by the remaining Reference Banks. Each Reference Bank shall use its best efforts to furnish quotations of rates to the Administrative Agent as contemplated hereby. If any of the Reference Banks shall be unable or otherwise fails to supply such rates to the Administrative Agent upon its request, the rate of interest shall be determined on the basis of the quotations of the remaining Reference Banks or Reference Bank. 2.7 Interest and Principal on Bid Rate Loans. Subject to Section 2.11(f) ---------------------------------------- herein, the outstanding principal amount of each Bid Rate Loan shall bear interest until payment is due in full (computed daily on the basis of a 360-day year and actual days elapsed) at a rate per annum equal to the Bid Rate. Borrower shall pay interest on each Bid Rate Loan on each Interest Payment Date for such Bid Rate Loan. Borrower shall repay in full the Principal Amount of each Bid Rate Loan on the last day of the Interest Period of such Bid Rate Loan. 2.8 Loan Accounts. Each Bank shall open and maintain on its books one or ------------- more loan accounts in Borrower's name. Each loan account shall show (without duplication) as debits thereto each Bank's portion of each Base Rate Loan and/or Eurodollar Loan and as credits thereto all Base Rate Loan and/or Eurodollar Loan payments received by such Bank for the account of such Bank and applied to principal so that the balance of the loan account(s) at all times reflect the principal amount due each Bank from Borrower as Base Rate Loans and Eurodollar Loans. All entries in said books shall be presumptive evidence of the making of each Base Rate Loan and Eurodollar Loan, the obligation of Borrower to repay each Base Rate Loan and Eurodollar Loan, and all payments received and disbursed by such Bank. Borrower agrees that if, in the opinion of any Bank, a promissory note or other evidence of debt is required or appropriate to reflect or enforce any Loans outstanding to or to be made by such Bank, then Borrower shall promptly execute and deliver to such Bank one or more promissory notes payable to such Bank to evidence the Loans outstanding to such Bank under this Agreement from time to time, together with such documents as such Bank may reasonably request to evidence the due authorization, execution, delivery and enforceability of such notes. If any notes are issued -14- hereunder, Administrative Agent and Borrower may treat the payee of that note as the owner of such note for all purposes. 2.9 Master Bid Rate Notes. Borrower shall execute a Master Bid Rate Note --------------------- in the form of Exhibit B hereto in favor of each Bank. The Master Bid Rate Note of each Bank shall evidence the outstanding principal amount of Bid Rate Loans made by such Bank, and shall be dated the first day of the Availability Period. Each Bank is authorized to indicate upon the grid attached to its Master Bid Rate Note the principal amount, interest rate and Interest Period of each Bid Rate Loan and all payments of principal and interest thereon. Such notations shall be presumptively correct as to the aggregate unpaid principal amount of the Bid Rate Loan made by such Bank, and interest due thereon, but the failure by such Bank to make such notations shall not affect the obligations of Borrower hereunder or under the Master Bid Rate Notes. 2.10 Conversion of Loans Between Eurodollar Loans and Base Rate Loans and -------------------------------------------------------------------- Conversion of Interest Periods of Eurodollar Loans. (a) On any Eurodollar - -------------------------------------------------- Banking Day Borrower may convert on a pro rata basis among the Banks any outstanding Base Rate Loans or Eurodollar Loans (but not Bid Rate Loans) into any other type of Loan available to Borrower hereunder (but not to a Bid Rate Loan), or Borrower may change the Interest Period of any Eurodollar Loan to another Interest Period available under this Agreement, subject to the following limitations: (i) No conversion of any Eurodollar Loan into any other Loan and no conversion of the Interest Period of any Eurodollar Loan may be made except on the last day of an Interest Period with respect thereto; and (ii) Any conversion shall be preceded by an irrevocable written or telephonic notice from Borrower that it elects such conversion, which notice shall be received by Administrative Agent at least three (3) Eurodollar Banking Days prior to the date requested for such conversion from or into a Eurodollar Loan or conversion of the Interest Period of a Eurodollar Loan. (b) Banks shall not be obligated to make or continue any Eurodollar Loan when any Event of Default has occurred and is continuing, but any outstanding Eurodollar Loan shall be automatically converted to a Base Rate Loan on the last day of the Interest Period for which a Eurodollar Rate was determined by Administrative Agent following occurrence of such Event of Default, and, unless Section 2.11(f) is applicable, Borrower shall be obligated to pay interest at the Base Rate from the date any Loan is so converted until such Loan is repaid in full regardless of the date when Administrative Agent obtains knowledge of such Event of Default. (c) Each conversion of a Loan into a Base Rate Loan or a Eurodollar Loan, as the case may be, shall be effected by each Bank, on behalf of Borrower, as applicable, by making a simultaneous payment of the relevant Eurodollar Loan, or Base Rate Loan, as the case may be, from the proceeds of the new Loans, procedures with respect thereto to be governed by the provisions of Section 2.3, except that disbursement shall be made by means of such payment rather than directly to Borrower to the extent applicable with respect to each Bank. -15- (d) If upon the expiration of any Interest Period applicable to Eurodollar Loans, Borrower has failed to select a new Interest Period to be applicable thereto, or if any Event of Default or Unmatured Event of Default shall then exist, Borrower shall be deemed to have elected to convert such Eurodollar Loans into Base Rate Loans effective as of the expiration date of such current Interest Period. 2.11 Disbursements and Payments. (a) Each Base Rate Loan and Eurodollar -------------------------- Loan shall be made on a pro rata basis by Banks, and each Bank's portion of each Loan shall be determined by application of its Normal Percentage. Each Bid Rate Loan shall be made entirely by the Bank whose offer was accepted by Borrower pursuant to Section 2.4. Each Bank's interest in each Loan and each payment to such Bank under this Agreement shall be for the account of such Bank's Lending Office. (b) Each Loan and each payment of principal, interest and other sums under this Agreement shall be made in immediately available funds (or such other funds as Administrative Agent may require) at Bank of America's Agency Administrative Services-West, 1850 Gateway Blvd., Concord, California 94520, ABA #111000012, Acct No. 3750836479, Ref: Hughes Electronics Corporation or such other office designated by Administrative Agent from time to time. (c) Each Bank agrees it will make the funds which it is to advance hereunder available to Bank of America's Agency Administrative Services-West, 1850 Gateway Blvd., Concord, California 94520, ABA #111000012, Acct No. 3750836479, Ref: Hughes Electronics Corporation or such other office designated by Administrative Agent from time to time not later than 11:00 a.m. California time on the Borrowing Date, and Administrative Agent will thereupon promptly advance to Borrower the amount so received from Banks. (d) Payment of all sums under this Agreement shall be made by Borrower to Administrative Agent, and the latter shall promptly distribute to each Bank its share of such payments. Each payment by Borrower shall be made without setoff or counterclaim and not later than 11:00 a.m. California time on the day such payment is due. All sums received after such time shall be deemed received on the next Business Day. (e) If Administrative Agent makes available to Borrower an amount due from any Bank which such Bank fails to make available to Administrative Agent, or if Administrative Agent makes available to any Bank an amount due from Borrower which Borrower fails to make available to Administrative Agent, Borrower or such Bank, as the case may be, shall, on demand, refund such amount to Administrative Agent, together with interest thereon for the period during which such amount was available to Borrower or such Bank, as the case may be, at the Federal Funds Rate. (f) Any sum of principal or interest payable by Borrower hereunder if not paid when due shall bear interest (payable on demand) from its due date until payment in full (computed daily on the basis of a 365 or 366, as the case may be, day year and actual days elapsed) at a rate per annum equal to the Default Rate. -16- 2.12 Facility Fee. Borrower shall pay Administrative Agent for the account ------------ of the Banks, a facility fee at the rate per annum equal to the Applicable Amount therefor on the Total Commitment (without regard to the amount of Loans outstanding at any time hereunder and without giving effect to any reduction pursuant to Section 2.1(c)) during the Availability Period; provided, however, following any reduction in the Total Commitment pursuant to Section 3.5 or 3.6 (but not a reduction pursuant to Section 2.1(c)) the computation of the facility fee shall be based upon such reduced Total Commitment as of the effective date of such reduction. The facility fee shall be computed on a calendar quarter basis. The facility fee shall be calculated on the basis of a 360-day year and actual days elapsed, which results in a higher fee than if a 365/366-day year were used, and shall be payable on the 10th day of each January, April, July and October (for the facility fee accrued during the previous calendar quarter) and on the Termination Date. 2.13 Extension of Termination Date. (a) The Borrower may, no earlier than ----------------------------- 60 days and not later than 45 days prior to the then effective Termination Date (as it may be extended from time to time pursuant hereto), request in writing that the Termination Date be extended for an additional 364 days by sending to the Administrative Agent, which will promptly then provide a copy to each Bank, an Extension Request. After Borrower's request, each Bank may, in its sole discretion, consent or not consent to such extension by giving written notice thereof to the Administrative Agent no later than 21 days after its receipt of such Extension Request. Each Bank's annual decision as to whether to extend the Termination Date shall be based, in part, on a new credit analysis utilizing then current information in respect of Borrower's business, financial condition and operations and other information furnished by Borrower. Failure of any Bank to respond within such 21 day period shall be deemed to be a refusal of such request by such Bank. The Administrative Agent shall promptly notify each Bank and Borrower of any Bank's decision to reject the proposed extension. (b) If, in accordance with the provisions of this Section 2.13, a Bank consents to the extension of the Termination Date, the Termination Date for such Bank shall be extended for 364 days from the then current Termination Date, without any further action by Borrower or such Bank; provided that no such -------- extension shall be effective unless the Commitments of Banks agreeing to so extend the Termination Date plus the Commitments of any New Banks which have agreed to become party to this Agreement pursuant to Section 11.18 constitute at least 50% of the Total Commitment existing on the date hereof. (c) If any Bank does not consent to a request for an extension of the Termination Date, or is deemed not to have consented to the requested extension, and the Termination Date has been extended for the other Bank(s): (i) the Borrower may, prior to the end of the non-extended Termination Date, terminate such Bank's Commitment under this Agreement upon payment in full of principal and interest on all Loans made by such Bank together with such other sums, if any, that may be due by reason of such prepayment and any fees owing to such Bank and, in connection with such termination, the Borrower may replace such non-consenting Bank with a New Bank or increase the Commitment of an existing Bank, in each case pursuant to Section 11.18; and (ii) if the Borrower has not previously terminated such non-consenting Bank's Commitment under this Credit Agreement and paid principal and interest on the Loans held by such non- consenting Bank and other amounts due to such non-consenting Bank as provided above, then such principal and interest and other amounts due to such non- consenting -17- Bank shall be due and payable on the non-extended Termination Date and the Termination Date shall not be extended insofar as such non-consenting Bank is concerned. SECTION 3 PAYMENT OF COSTS AND REDUCTION OF THE COMMITMENT 3.1 Indemnification Upon Failure to Pay Eurodollar Loan or Bid Rate Loan. -------------------------------------------------------------------- If Borrower makes any payment of principal with respect to any Eurodollar Loan or Bid Rate Loan on a day other than the last day of the then current Interest Period applicable to such Loan (including without limitation any payment upon reduction of the Commitments) or fails to borrow, continue, convert, pay or prepay its Eurodollar Loan or Bid Rate Loan on a date designated to Administrative Agent in a notice pursuant to this Agreement (if such failure does not result from the application of Sections 4.1 or 4.2), Borrower shall reimburse each Bank within 15 days after receipt of written demand for any loss incurred by it as a result of the timing of such payment or non-borrowing not reflected in the Eurodollar Rate or the Bid Rate, including without limitation any loss incurred in liquidating or employing deposits from third parties and loss of profit for the period after such payment or non-borrowing. A certificate of such Bank setting forth the amounts reasonably necessary so to reimburse it in respect of any loss shall be conclusive and binding absent manifest error. 3.2 Increased Costs. (a) If after the date hereof, any applicable law, --------------- rule or regulation or any change therein or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof or compliance by any Bank (or its Lending Office) with any request or directive of any such authority, central bank or comparable agency, whether or not having the force of law, shall impose, modify or deem applicable: (i) any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit, compulsory loan or similar requirements against assets, commitments or deposits or other liabilities with, of or for the account of, or credit extended by, or any acquisition of funds by or for the account of any Bank or its Lending Office or the London interbank market or any other condition affecting its obligations to make the Loans to Borrower hereunder; (ii) any capital or similar requirements against (or against any class of or change in or the amount of) assets or liabilities of, or commitments or extensions of credit by, such Bank; each Bank which is so affected shall give prompt notice to Borrower describing such reserves or requirements at least four Business Days prior to the date such Bank will begin to implement such additional charges with respect to Borrower. If the result of any of the foregoing is to increase the cost or reduce the profit to such Bank (or its Lending Office) under this Agreement by an amount deemed by such Bank to be material, then, within 15 days after written demand by such Bank, Borrower will pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost incurred or reduction in profit suffered by such Bank. Such Bank will designate a different Lending Office if such designation will avoid the -18- need for, or reduce the amount of, such compensation and will not be otherwise disadvantageous to such Bank in the sole discretion of such Bank. A certificate of such Bank setting forth the basis for determining such additional amount or amounts necessary to compensate the Bank shall be conclusive in the absence of manifest error. (b) Without limiting the effect of the foregoing (but without duplication), upon any Bank's prior written request, Borrower shall pay to such Bank on the last day of each Interest Period, so long as such Bank may be required to maintain reserves against "eurocurrency liabilities" under Regulation D (as at any time amended) of the Board of Governors of the Federal Reserve System, as additional interest on the unpaid principal amount of each Eurodollar Loan by such Bank outstanding during such Interest Period, an additional amount (determined by such Bank and notified to Borrower in writing) up to but not exceeding such amount as would, together with payments of interest on such Eurodollar Loan for such Interest Period, result in the receipt by such Bank of total interest on such Eurodollar Loan, for such Interest Period at a rate determined by such Bank to be equal to the sum of: (i) the Eurodollar Rate divided by a sum equal to (a) 1 minus (b) the rate (expressed as a decimal) of such reserves required by Regulation D, plus (ii) the Applicable Amount for Eurodollar Loans. In determining the additional amount payable for an Interest Period pursuant to this Section, such Bank shall take into account any transitional adjustment or phase-in provisions of such reserve requirements applicable during such Interest Period, which would reduce the reserve requirement otherwise applicable to eurocurrency liabilities during such Interest Period; provided, however, each Bank in its sole discretion may determine the allocation of reserve requirements to its Eurodollar Loans. Each such determination made by such Bank, and each such notification by such Bank to Borrower under this Section, shall be conclusive as to the matters set forth therein in the absence of manifest error. 3.3 Taxes. All payments or reimbursements under this Agreement and any ----- instrument or agreement required hereunder shall be made without setoff or counterclaim and free and clear of and without deduction for any and all present and future Taxes. Borrower agrees to cause all such Taxes to be paid on behalf of any Bank or Administrative Agent directly to the appropriate Governmental Authority. If Borrower is legally prohibited from complying with this subsection, payments due to such Bank or Administrative Agent under this Agreement and any instrument or agreement required hereunder shall be increased so that, after provisions for Taxes and all Taxes on such increase, the amounts received by such Bank or Administrative Agent will be equal to the amounts required under this Agreement and any instrument or agreement required hereunder as if no Taxes were due on such payments. Borrower shall indemnify each Bank and Administrative Agent for the full amount of Taxes payable by such Bank or Administrative Agent and any liabilities (including penalties, interest and expenses) arising from such Taxes within 30 days from any written demand by such Bank. Borrower shall provide evidence that all applicable Taxes have been paid to the appropriate taxing authorities by delivering to Administrative Agent official tax receipts or notarized copies or other evidence thereof satisfactory to Administrative Agent, within 90 days after the due date for such Tax payment. Such Bank will designate a different Lending Office if such designation will avoid the -19- need for, or reduce the amount of, such payment or reimbursement and will not be otherwise disadvantageous to such Bank in the sole discretion of such Bank. 3.4 Prepayment. Upon the irrevocable written notice of Borrower received ---------- by Administrative Agent by 11:00 a.m. California time at least one Business Day prior to the prepayment of a Base Rate Loan and at least five Eurodollar Banking Days prior to the prepayment of a Eurodollar Loan, Borrower may prepay any Eurodollar Loan or Base Rate Loan; but such prepayment shall be in an amount of at least $5,000,000 or multiple integrals of $1,000,000 in excess thereof. The notice of prepayment shall specify the date of the prepayment, the amount of the prepayment and the Loan to be prepaid. Each such prepayment shall be made on the date specified and, in the case of a prepayment of any Eurodollar Loan shall be accompanied by the payment of accrued interest on the amount prepaid. Subject to compliance with the foregoing procedures, Base Rate Loans may be prepaid at any time without cost or penalty of any kind. If Borrower elects to prepay a Eurodollar Loan, Borrower shall, on demand by each Bank, pay such Bank the amount (if any) by which (a) the additional interest which would have been payable on the amount prepaid on such Bank's portion of such Loan had it not been paid until the last day of the Interest Period of such Loan exceeds (b) the interest which would have been recoverable by such Bank by placing such prepaid amount on deposit in the offshore Dollar interbank markets for a period starting on the date on which it was prepaid and ending on the last day of the Interest Period for such Loan. Bid Rate Loans may not be prepaid. 3.5 Pro Rata Reduction of Commitments by Borrower. Borrower may, upon --------------------------------------------- five Business Days' prior written notice (which notice shall be irrevocable) to Banks through Administrative Agent, reduce the Total Commitment on a pro rata basis among the Banks. Such a reduction shall be in an amount of at least $5,000,000 or multiple integrals of $1,000,000 in excess thereof. Borrower shall, on the effective date of each such reduction, repay to each Bank through Administrative Agent that portion of each Loan which exceeds the amount of each Bank's Commitment as reduced, together with accrued interest on the amount paid and accrued facility fees subject to such reduction. After the effective date of each reduction, the Banks' obligations under this Agreement shall be based on the reduced Commitments. 3.6 Reduction of One Bank's Commitment by Borrower. If the amount of any ---------------------------------------------- payment to be made to or for the account of any Bank is increased under Section 3.3 or any Bank makes a claim under Section 3.2, then: (a) Borrower may, within 60 days after the notice thereof and by not less than five Business Days' written notice to Administrative Agent, cancel such Bank's Commitment, whereupon such Bank shall cease to be obligated to participate in further Loans hereunder and its Commitment shall be reduced to the amount of its outstanding Loans until such Loans are repaid by Borrower either on the Principal Repayment Date for such Loans or pursuant to Section 3.6(b), at which time such Bank's Commitment shall be reduced to zero; (b) if Borrower cancels such Bank's Commitment pursuant to clause (a) above and if Borrower so elects by written notice to Administrative Agent given at the same time as the notice referred to in clause (a) above, Borrower shall prepay such Bank's portion of each outstanding Loan together with any accrued interest thereon plus all costs and expenses (including break and funding costs in connection with the relending, reborrowing, funding or other employing of -20- funds) incurred by such Bank as a result of such cancellation or prepayment on a date other than the Principal Repayment Date for such Loan; and (c) Borrower shall repay all Bid Rate Loans from such Bank on the Principal Repayment Date for such Loans and shall not request any additional Bid Rate Loans from such Bank. 3.7 Notice of Reductions. Each notice of reduction or prepayment given -------------------- pursuant to Section 3.4, 3.5 or 3.6 shall be irrevocable, shall specify the date upon which such reduction or prepayment is to be made and, in the case of a notice of prepayment, shall obligate Borrower to make such prepayment on such date. Borrower may not give a notice of reduction of a part of the Commitment pursuant to Section 3.6 at any time prior to the date so specified in any previous such notice. 3.8 Designation of Replacement Bank. If the Commitment of any Bank is ------------------------------- cancelled by Borrower pursuant to Section 3.6 or if any Bank terminates its Commitment with respect to Eurodollar Loans pursuant to Section 4.2, Borrower, with the consent of Administrative Agent, may designate an Eligible Assignee (or, if it deems appropriate, more than one Eligible Assignee) acceptable to Administrative Agent to act as a Bank hereunder and upon execution of a written agreement in form satisfactory to Administrative Agent by such Eligible Assignee in which it agrees to abide by all of the terms, conditions and obligations applicable to a Bank herein and to have a Commitment as specified in such agreement, such Eligible Assignee shall be deemed a Bank hereunder to the same extent as if it were a signatory hereto and, thereafter, such Eligible Assignee shall for all purposes be considered a "Bank" hereunder. 3.9 Effect of Reduction of Commitment. If, at any time: --------------------------------- (a) the Commitment of any Bank is reduced to zero in accordance with the terms of this Agreement; (b) all indebtedness and other amounts owed to such Bank by Borrower hereunder or in connection herewith have been satisfied in full; and (c) such Bank is under no further actual or contingent obligation hereunder, then such Bank shall cease to be a party hereto and a Bank for the purposes hereof; provided, however, that the obligations of Borrower under Sections 3.1, -------- ------- 3.2, 3.3, 11.14, 11.15 and 11.16 shall survive the cancellation of the Commitment and the termination of this Agreement. 3.10 Accrued Fees. On the date of the cancellation of any portion of the ------------ Total Commitment in accordance with Section 3.5 or of any Bank's Commitment under Section 3.6, all accrued facility fees for such portion of the Total Commitment or of such Bank's Commitment shall be paid in full by Borrower. 3.11 Survival. The agreements and obligations of Borrower in this Section -------- 3 shall survive the termination of this Agreement. -21- SECTION 4 CHANGE IN CIRCUMSTANCES AFFECTING LOANS 4.1 Inability to Determine Eurodollar Rate. If any Reference Bank -------------------------------------- determines (which determination shall be made in good faith and shall be conclusive and binding upon Borrower) that (a) by reason of circumstances then affecting the Eurodollar interbank market, adequate and reasonable means do not or will not exist for ascertaining the interest rate applicable to any Eurodollar Loans, or (b) Dollar deposits in the relevant amounts and for the relevant Interest Period are not available to the Banks in the Eurodollar interbank market, then it shall notify the Administrative Agent who shall forthwith give written notice of such determination to Borrower and each Bank at least one Business Day prior to the first day of any Interest Period so affected; whereupon, until Administrative Agent shall notify Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Eurodollar Loans shall be suspended and (ii) Borrower shall repay in full, without premium or penalty, the then outstanding principal amount of the Eurodollar Loans, together with accrued interest thereon, on the last day of the then current Interest Period pursuant to the next sentence. Unless Borrower notifies Administrative Agent to the contrary within one Business Day after receiving a notice from Administrative Agent pursuant to this Section, Borrower shall, concurrently with prepaying the Eurodollar Loans pursuant to this Section, be deemed automatically without any further notice to Administrative Agent or the Banks to have requested and received Base Rate Loans in an equal principal amount from the Banks, the proceeds of which are deemed to have been used to repay the other Loans. 4.2 Illegality. If, after the Effective Date, the introduction of or any ---------- change in any applicable law, rule or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance by any Bank with any request or directive (whether or not having the force of law) of any such authority shall make it unlawful or impossible for such Bank (or its Lending Office) to make, maintain or fund its Eurodollar Loans, such Bank shall forthwith give written notice thereof to Administrative Agent and to Borrower. Before giving any notice pursuant to this Section, such Bank shall designate a different Lending Office if such designation will avoid the need for giving such notice and will not be otherwise disadvantageous to such Bank in the sole judgment of such Bank. Upon receipt of such notice (a) if such Bank has received a request with respect to Eurodollar Loans and has not yet made such Loan, a Base Rate Loan shall be deemed to have been designated without any further notice; (b) all Loans which would otherwise be made by such Bank as Eurodollar Loans shall be made instead as Base Rate Loans; and (c) Borrower shall prepay in full, without premium or penalty, the then outstanding principal amount of such Bank's Eurodollar Loans, together with accrued interest, on either (i) the last day of the then-current Interest Period if such Bank may lawfully continue to fund and maintain such Eurodollar Loans, to such day or (ii) immediately if such Bank may not lawfully continue to fund and maintain such Eurodollar Loans to such day together with an amount, if any, calculated as set forth in the last sentence of Section 3.4. Concurrently with prepaying each such Eurodollar Loan Borrower shall borrow a Base Rate Loan from such Bank in an amount equal to the principal amount of such Bank's Eurodollar Loans, the proceeds of which are deemed to have been used to repay such Bank's Eurodollar Loans. If circumstances subsequently change so that such Bank is not further affected, and no Eligible Assignee has been appointed pursuant to Section 3.8, such Bank -22- shall so notify Borrower and Administrative Agent and such Bank's obligation to make and continue Eurodollar Loans shall be reinstated upon written request of Borrower. SECTION 5 CONDITIONS PRECEDENT 5.1 Conditions Precedent to Signing Date. The occurrence of the Signing ------------------------------------ Date is subject to the condition that on the Signing Date this Agreement, duly executed and delivered by the parties hereto, shall have been delivered to Administrative Agent with counterparts for each Bank and in form and substance satisfactory to Banks. 5.2 Conditions Precedent to Effective Date. The obligation of Banks to -------------------------------------- make the initial Loans hereunder is subject to the condition that on the Effective Date there shall have been delivered to the Administrative Agent with counterparts for each Bank: (a) Notes, if any, requested by any Bank pursuant to Section 2.8 prior to the Effective Date, duly executed and delivered by the Borrower. (b) The favorable written opinions, dated the Effective Date, of the General Counsel or Assistant General Counsel of Borrower in the form set out in Exhibit F. (c) Certificate of the Secretary or an Assistant Secretary of Borrower dated the Effective Date as to (i) the Certificate of Incorporation and the By- laws of Borrower, (ii) the resolution of the Board of Directors of Borrower or its Executive Committee in connection with this Agreement, and (iii) the incumbency and signatures of the person authorized to execute and deliver this Agreement and any other instrument, document or other agreement required hereunder on the Effective Date. (d) A certificate, which shall be true and correct, signed by a vice president of Borrower dated the Effective Date certifying: (i) that since June 30, 1999, there has been no Material Adverse Change; (ii) that the representations and warranties contained in this Agreement are true and correct in all material respects; (iii) that no event has occurred and is continuing or would result from the making of a Loan which constitutes or would constitute an Event of Default or an Unmatured Event of Default; and (iv) the Debt Ratings as of the Effective Date. (e) Certificate of Good Standing in relation to Borrower issued by the Secretary of the State of Delaware, dated not more than one month prior to the Effective Date. (f) Evidence satisfactory to Administrative Agent that all obligations of Borrower outstanding under the Existing Agreement have been repaid in full and all commitments thereunder have been terminated, and the Multi-Year Credit Agreement is effective in accordance with its terms. (g) A copy of press releases or other evidence of Borrower's Debt Ratings from both S&P and Moody's. (h) The Master Bid Rate Notes, as referred to in Section 2.9, duly executed by Borrower, shall have been delivered by Borrower to Administrative Agent. -23- (i) The Administrative Agent shall have received all fees payable to it and/or the Banks on the Effective Date under the Letter Agreement. (j) Unless waived by Administrative Agent, Borrower shall have paid all Attorney Costs of Administrative Agent to the extent invoiced prior to or on the Closing Date, including such additional amounts of Attorney Costs as shall constitute its reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between Borrower and Administrative Agent). 5.3 Conditions Precedent to Loans. The obligation of Banks to disburse ----------------------------- each Loan (including the first Loan) is subject to the following conditions and by communicating a Loan Request Borrower is deemed to certify that: (a) Borrower's representations and warranties (excluding Section 6.6) contained in this Agreement and any other documents delivered pursuant hereto are true and correct in all material respects on the date of such Loan Request; (b) the financial statements delivered to Administrative Agent by Borrower pursuant to Section 7.5 on the date most nearly preceding the Loan Request present fairly the financial position and results of operations and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such statements relate, (subject, in the case of unaudited financial statements to year end adjustments); and (c) no Event of Default or Unmatured Event of Default has occurred and is continuing except such Events of Default or Unmatured Events of Default as have been expressly waived by or on behalf of the Banks. SECTION 6 REPRESENTATIONS AND WARRANTIES 6. Borrower represents and warrants that as of the Effective Date: 6.1 Authority of Borrower. Borrower (a) is a corporation duly organized --------------------- and existing under the laws of the State of Delaware, with its principal place of business in Los Angeles County, California, (b) has the corporate power to own its property and carry on its business as now being conducted, (c) is duly qualified and authorized to do business, and is in good standing in every state, country or other jurisdiction where the failure to be so qualified, authorized and in good standing would have a material adverse effect on Borrower, (d) has full power and authority to borrow the sums provided for in this Agreement, to execute, deliver and perform this Agreement and any instrument or agreement required hereunder, and to perform and observe the terms and provisions hereof and thereof, (e) has taken all corporate action on the part of Borrower, its directors or stockholders, necessary for the authorization, execution, delivery and performance of this Agreement, and any instrument or agreement required hereunder on the date hereof, (f) requires no consent or approval of any trustee or holder of any indebtedness or obligation of Borrower to enter into, deliver or perform its obligations under this Agreement and the Notes, and (g) requires no consent, permission, authorization, order or license of any Governmental Authority in connection with the execution and delivery and performance of this Agreement and any instrument or agreement required hereunder, or any transaction contemplated hereby, except as may have been obtained and certified copies of which have been delivered to Banks through Administrative Agent. -24- 6.2 Binding Obligations. This Agreement is the legal, valid and binding ------------------- obligation of Borrower, enforceable against it in accordance with its terms, and any instrument or agreement required hereunder, when executed and delivered, will be similarly valid, binding and enforceable. 6.3 Incorporation of Restricted Subsidiaries. Each Restricted Subsidiary ---------------------------------------- of Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and, to the best of Borrower's knowledge, is duly licensed or qualified as a foreign corporation in all jurisdictions where the failure to be so qualified, authorized and in good standing would have a material adverse effect on Borrower and its Restricted Subsidiaries taken as a whole. 6.4 No Contravention. There is no charter, by-law, or capital stock ---------------- provision of Borrower and no provision of any indenture or material agreement, written or oral, to which Borrower is a party or under which Borrower is obligated, nor is there any statute, rule or regulation, or any judgment, decree or order of any court or agency binding on Borrower which would be contravened by the execution, delivery and performance of this Agreement, or any instrument or agreement required hereunder, or by the performance of any provision, condition, covenant or other term hereof or thereof. 6.5 Notices. Except as previously disclosed in writing to Administrative ------- Agent, no event has occurred which, to the best of its knowledge, would require Borrower to notify Administrative Agent and the Banks pursuant to Section 7.3 hereof. 6.6 Financial Statements. The audited consolidated financial statements -------------------- dated December 31, 1998 and the unaudited consolidated financial statements for the six months ended June 30, 1999 furnished by Borrower to the Administrative Agent and Banks, present fairly the financial position and results of operation and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal periods to which such statements relate, and such financial statements were prepared in accordance with GAAP. Since June 30, 1999, there has been no Material Adverse Change. The Borrower and its Subsidiaries did not have any contingent obligations, liabilities for taxes or other outstanding financial obligations at June 30, 1999 which are material in the aggregate for Borrower and its Subsidiaries, taken as a whole, except as disclosed in such unaudited consolidated financial statements. 6.7 ERISA. Based upon ERISA and the regulations and published ----- interpretations thereunder, the Plans of Borrower and its Subsidiaries and, to the knowledge of Borrower, the Plans of any other ERISA Affiliates, are in material and substantial compliance in all material respects with the applicable provisions of ERISA and Borrower and its Subsidiaries are in compliance with such Plans in all material respects. No Reportable Event which has or could be reasonably be expected to result in termination thereof by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer such Plan has occurred and is continuing with respect to any Plan. 6.8 Regulation U; Investment Company Act. Borrower is not engaged ------------------------------------ principally, or as one of its important activities, in the business of extending credit for the purposes of purchasing or carrying any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System; and neither Borrower nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940. 6.9 Taxes. Borrower has filed all federal and state tax returns which to ----- the knowledge of the financial officers of Borrower are required to have been filed, and has paid prior to delinquency all taxes that have become due pursuant to said returns or pursuant to any assessment, except as are being contested in good faith by appropriate proceedings and as to which adequate reserves have been provided on the books of Borrower in accordance with GAAP. 6.10 Insurance. Borrower and its Restricted Subsidiaries maintain --------- insurance with responsible insurance companies, in such amounts and against such risks as is customarily carried by owners of similar businesses and property, including protection against loss of use and occupancy, to the extent such insurance is reasonably available at commercially reasonable rates, and it will furnish Administrative Agent, upon written request, with full information as to the insurance carrier; provided, however, that Borrower and its Restricted -------- ------- Subsidiaries may self insure to the extent they deem prudent. 6.11 Liens. The properties and assets of Borrower and its Restricted ----- Subsidiaries, real, personal and mixed, are not subject to any Liens, except for Liens permitted by this Agreement. 6.12 Litigation. Except as disclosed in writing to the Banks prior to the ---------- Signing Date, no litigation, investigation or proceeding of or before an arbitrator or Governmental Authority is pending or, to the knowledge of Borrower after due and diligent investigation, threatened by or against Borrower or any of its Subsidiaries or against any of their properties or revenues which could reasonably be expected to cause a Material Adverse Change. 6.13 Environmental Compliance. Borrower and its Subsidiaries each conduct ------------------------ in the ordinary course of business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof Borrower has reasonably concluded that such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to cause a Material Adverse Change. 6.14 Year 2000. Borrower has (a) completed a review and assessment of all --------- areas within its and each of its Subsidiaries' business and operations (including those affected by customers and vendors) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications and devices containing imbedded computer chips used by Borrower or any of its Subsidiaries may be unable to recognize and perform properly date- sensitive functions involving certain dates prior to and any date after December 31, 1999), (b) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (c) to date, implemented that plan in accordance with that timetable. Based on the foregoing, Borrower believes that all computer applications and devices containing imbedded computer chips that are material to its or any of its Subsidiaries' business and operations are reasonably expected on a timely basis to be able to perform properly date- sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure to do so could not reasonably be expected to cause a Material Adverse Change. -26- 6.15 Disclosure. No written statement (or oral statement made by senior ---------- executives of Borrower at the bank meeting held on November 3, 1999, it being understood that any projections contained in such statements are not to be viewed as facts but were based on good faith estimates and assumptions believed by Borrower to be reasonable), written information, report, representation, or warranty made by Borrower in this Agreement or furnished to Administrative Agent or any Bank in connection with this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading. SECTION 7 AFFIRMATIVE COVENANTS OF BORROWER Borrower covenants and agrees that so long as the credit hereby granted shall remain available in whole or in part or until the full and final payment of all indebtedness incurred hereunder, unless Majority Banks waive compliance in writing: 7.1 Use of Proceeds of Loans. It will use the proceeds of the Loans made ------------------------ by Banks to Borrower hereunder for the repayment of Commercial Paper or other indebtedness of Borrower existing as of the Effective Date and for its general working capital requirements, including acquisition and improvement of plant, property and equipment and acquisitions, and other lawful corporate purposes. 7.2 Management of Business. It will manage its business and conduct its ---------------------- affairs such that the representations and warranties contained in Sections 6.1 through 6.3, 6.7 through 6.9 and 6.13 and 6.14 remain true and correct at all times during the Availability Period. 7.3 Notice of Certain Events. It will, and it will cause each of its ------------------------ Restricted Subsidiaries to, give prompt written notice to Administrative Agent (who shall promptly notify the Banks) of: (a) all Events of Default or Unmatured Events of Default under any of the terms or provisions of this Agreement; (b) any event of default under any other agreement, contract, indenture, document or instrument entered, or which may be entered, into by it that could, if settled unfavorably, result in a Material Adverse Change; (c) all material changes in senior management publicly announced; (d) all litigation, arbitration or administrative proceedings involving Borrower or any of its Subsidiaries which could in the reasonable opinion of Borrower be expected to result in a Material Adverse Change; (e) any other matter which has resulted in, or might in the reasonable opinion of Borrower result in, a Material Adverse Change; (f) concurrently with the public announcement thereof, any proposed Merger or Disposition affecting any Restricted Subsidiary; -27- (g) any change in any Debt Rating by S&P or Moody's; and (h) promptly upon any discovery or determination that any computer application that is material to Borrower's or any of its Subsidiaries' business and operations will not be Year 2000 compliant on a timely basis, except to the extent that such failure could not reasonably be expected to cause a Material Adverse Change. 7.4 Records. It will, and it will cause each of its Restricted ------- Subsidiaries to, keep and maintain full and accurate accounts and records of its operations according to GAAP and will permit Administrative Agent, and its designated officers, employees, agents, and representatives, to have access thereto and to make examination thereof at all reasonable times, to make audits, and to inspect and otherwise check its properties, real, personal and mixed; provided, however, that such examination and access shall be in compliance with - -------- ------- security and confidentiality requirements of all Governmental Authorities and, subject to Section 11.16, Borrower's corporate policies. 7.5 Information Furnished. It will furnish to Banks and Administrative --------------------- Agent: (a) Within 60 days after the close of each quarter, except for the last quarter of each fiscal year, its consolidated balance sheet as of the close of such quarter and its consolidated profit and loss statement and cash flow statement for that quarter and for that portion of the fiscal year ending with such quarter, all prepared in accordance with GAAP, and all certified by its Treasurer or an Assistant Treasurer as presenting fairly the financial position and results of operations and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such statements relate, subject to normal year-end adjustments. (b) Within 120 days after the close of each fiscal year, a complete copy of its annual financial statements, which statements shall include at least its consolidated balance sheet as of the close of such fiscal year and its consolidated profit and loss statement and cash flow statement for such fiscal year, prepared by Deloitte & Touche (or such other independent certified public accountants of recognized international standing selected by Borrower) in accordance with GAAP applied on a basis consistent with that of the previous year, and which statements shall include the opinion of such accountants, such opinion not to be qualified or limited because of any restricted or limited nature of examination made by such accountants or because of a "going concern" qualification. (c) Within 60 days after the close of each quarter except for the last quarter of each fiscal year, (and within 120 days after the close of each fiscal year) its certificate executed by Borrower's Treasurer or an Assistant Treasurer that (i) the representations and warranties set forth in Section 6 (with the exception of Section 6.6) are true and correct in all material respects; and (ii) no Event of Default or Unmatured Event of Default has occurred and is continuing except such Events of Default or Unmatured Events of Default as have been expressly waived by or on behalf of the Banks. -28- (d) concurrently with the delivery of the financial statements referred to in clauses (a) and (b), a duly completed Compliance Certificate signed by --- --- Borrower's Treasurer or an Assistant Treasurer; (e) promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to public securityholders of Borrower, and copies of all annual, regular, periodic and special reports and registration statements which Borrower may file or be required to file with the Securities and Exchange Commission under Sections 13 or 15(d) of the Securities Exchange Act of 1934 (as amended), and not otherwise required to be delivered to Administrative Agent pursuant hereto; (f) Such other information concerning its affairs as Administrative Agent or Majority Banks may reasonably request. 7.6 Execution of Other Documents. It will promptly, upon demand by ---------------------------- Administrative Agent, execute all such additional agreements, documents and instruments in connection with this Agreement as Administrative Agent or Majority Banks may deem necessary. 7.7 ERISA. It will, and it will cause each of its Subsidiaries to: ----- (a) At all times, make prompt payment of contributions required to meet the minimum funding standard set forth in ERISA with respect to its Plans, except to the extent that waivers are granted by the appropriate Governmental Authority; (b) Notify Administrative Agent immediately of (i) any Reportable Event which could reasonably be expected to result in aggregate liability to Borrower and its Subsidiaries in excess of $75,000,000 and (ii) any other fact arising in connection with any of its Plans or a Plan of any ERISA Affiliate which has resulted, or could reasonably be expected to result, in termination thereof by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer such Plan, in each case together with a statement, if requested by Administrative Agent, as to the reasons therefor and the action, if any, which Borrower or such ERISA Affiliate proposes to take with respect thereto; and (c) Furnish to Administrative Agent, upon its written request, such information concerning any of its Plans as may be reasonably requested. 7.8 Administrative Agent's Fees. It will compensate Administrative Agent --------------------------- as set forth in the Letter Agreement. 7.9 Compliance with Law. It will, and will cause each of its Subsidiaries ------------------- to, comply with the requirements of all applicable laws, rules, regulations, and orders of any Governmental Authority, a breach of which would result in a Material Adverse Change, except where contested in good faith by appropriate proceedings diligently pursued. 7.10 Compliance with Agreements. Promptly and fully comply with all -------------------------- Contractual Obligations under all material agreements, indentures, leases and/or instruments to which any one or more of them is a party, except for any such ------ Contractual Obligations (a) the performance of which would cause an Event of Default, (b) then being contested by any of them in good faith -29- by appropriate proceedings, or (c) if the failure to comply therewith could not reasonably be expected to cause a Material Adverse Change. 7.11 Maintenance of Insurance. Maintain liability and casualty insurance ------------------------ as provided in Section 6.10. SECTION 8 NEGATIVE COVENANTS OF BORROWER 8. Borrower covenants and agrees that so long as the credit hereby granted shall remain available in whole or in part or until the full and final payment of all indebtedness incurred hereunder, unless Majority Banks waive compliance in writing: 8.1 Liens. ----- (a) Borrower will not, nor will it permit any Restricted Subsidiary to, issue, incur, guaranty or assume any indebtedness for money borrowed secured by a Lien upon any property or assets of Borrower or any Restricted Subsidiary or upon any shares of stock or indebtedness of any Restricted Subsidiary (whether such property, assets, shares of stock or indebtedness are now owned or hereafter acquired) without in any such case effectively providing concurrently with the issuance, incurrence, guarantee or assumption of any such indebtedness that the Commitments and Loans and any other obligations of Borrower to the Banks (together with, if Borrower shall so determine, any other indebtedness of Borrower or such Restricted Subsidiary ranking equally with the Commitments and Loans and such other obligations and then existing or thereafter created) shall be secured equally and ratably with or prior to such indebtedness by a Lien upon such property, assets, shares of stock or indebtedness, unless the aggregate amount of such indebtedness for money borrowed secured by such Liens, together with all other indebtedness for money borrowed of Borrower and its Subsidiaries which (if originally issued, incurred, guaranteed or assumed at such time) would otherwise be subject to the foregoing restrictions (but not including indebtedness for money borrowed permitted to be secured under sub-clauses (1) through (7) of Section 8.1(b)), does not at the time exceed 5% of Consolidated Adjusted Net Worth. (b) The above restrictions shall not apply to indebtedness of Borrower or any of its Restricted Subsidiaries secured by: (1) Liens existing as of the date hereof and listed in Exhibit E; (2) Liens on property, assets, shares of stock or indebtedness of any corporation existing at the time such corporation becomes a Restricted Subsidiary; (3) Liens on property existing at the time of acquisition of such property by Borrower or a Restricted Subsidiary, or Liens to secure the payment of all or any part of the purchase price of property upon the acquisition of such property by Borrower or a Restricted Subsidiary or to secure any indebtedness incurred or guaranteed prior to, at the time of, or within 180 days after, the later of the date of acquisition of such property and the date such property is placed in service, for the purpose of financing all or any part of the purchase price thereof, or Liens to secure any indebtedness incurred or guaranteed for -30- the purpose of financing the cost to Borrower or a Restricted Subsidiary of improvements to such acquired property; provided, however, that for -------- ------- purposes of this clause 3, (i) a satellite will be treated as a newly- acquired asset as of the date it is placed in service and (ii) any satellite transponder acquired through the exercise of an early buy-out option shall be treated as a newly-acquired asset as of the date such option is exercised; (4) Liens securing indebtedness of a Restricted Subsidiary owing to Borrower or to another Restricted Subsidiary; (5) Liens on property of a corporation existing at the time such corporation is merged or consolidated with Borrower or a Restricted Subsidiary (in accordance with Section 8.2) or at the time of a sale, lease or other disposition of the properties of a corporation as an entirety or substantially as an entirety to Borrower or a Restricted Subsidiary; (6) Liens on property of Borrower or a Restricted Subsidiary in favor of the United States of America or any state thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any state thereof, or in favor of any other country, or any political subdivision thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such Liens; or (7) any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any Liens referred to in the foregoing sub-clauses (1) to (6), inclusively; provided, however, that -------- ------- the principal amount of indebtedness secured thereby shall not exceed the principal amount of indebtedness so secured at the time of the incurrence or guarantee thereof and that such extension, renewal or replacement shall be limited to all or a part of the property which secured the Lien so extended, renewed or replaced (plus improvements on such property). 8.2 Mergers, Liquidations and Sales of Assets. It will not, nor will it ----------------------------------------- permit any of its Restricted Subsidiaries to liquidate or dissolve or enter into any consolidation, merger, partnership, joint venture, syndicate, pool or other combination (collectively, the "Mergers") or convey, sell or lease all or substantially all of its assets or business or the stock or all or substantially all of the assets or business of a Restricted Subsidiary (collectively, "Dispositions"), except for: (a) mergers between Subsidiaries, or between Subsidiary and Borrower where Borrower is the surviving corporation; (b) mergers where Borrower is the surviving corporation; (c) transfers of assets from one Restricted Subsidiary to another Restricted Subsidiary or from any Restricted Subsidiary to Borrower; (d) sales, leases, transfers or assignments of operating rights, licenses or franchises in transactions which could not reasonably be expected to result in a Material Adverse Change; and -31- (e) the Disposition of any Restricted Subsidiary; provided that both Debt -------- Ratings remain Investment Grade on the effective date of any such Disposition; provided, however, no Disposition or Merger otherwise permitted by clauses (a) - -------- ------- through (e) above shall take place if before, or after giving effect to any such Disposition or Merger, an Event of Default or Unmatured Event of Default exists or would exist. 8.3 Defaults. It will not, nor will it permit any of its Restricted -------- Subsidiaries to, commit or do any act or thing which would constitute an event of default under any of the material terms or provisions of any other material agreement, contract, indenture, document or instrument executed, or to be executed by any of them, except those that may be contested in good faith and would not, if settled unfavorably, result in a Material Adverse Change. 8.4 Compliance with Regulations. Borrower will not engage principally, or --------------------------- as one of its important activities, in the business of extending credit for the purposes of purchasing or carrying any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System; and it will not use the proceeds of any Loan for the purpose, directly or indirectly, whether immediate, incidental or ultimate, (a) to purchase or carry, within the meaning of such Regulation U, any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock, unless done in strict compliance with such Regulation U and other applicable law and Borrower shall have executed and delivered to each Bank prior to such use a Form U-1 statement evidencing compliance with such Regulation U and such other documents relating thereto as Administrative Agent or any Bank shall request, or (b) in a manner which would violate, or result in a violation of, Regulation T, U, or X of the Board of Governors of the Federal Reserve System. 8.5 Financial Covenants. ------------------- (a) Shareholders' Equity. Borrower will not permit Shareholders' Equity as at the end of any fiscal quarter to be less than the sum of (i) $7,125,000,000, (ii) an amount equal to 50% of Borrower's consolidated net income (as determined in accordance with GAAP) earned in each fiscal quarter ending after December 31, 1998 (with no deduction for a net loss in any such fiscal quarter) and (iii) an amount equal to 50% of the aggregate increase in Shareholders' Equity after December 31, 1998 by reason of the issuance of capital stock of Borrower (including upon any conversion of debt securities of Borrower into such capital stock). (b) Leverage Ratio. Borrower will not permit the Leverage Ratio as at the end of any fiscal quarter set forth below to be greater than the ratio set forth below opposite such fiscal quarter: -32- Fiscal Quarters Ending Maximum Leverage Ratio ------------------------------------------------------------ December 31, 1999 4.00 March 31, 2000 4.50 June 30, 2000 4.00 September 30, 2000 4.00 December 31, 2000 3.75 and thereafter (c) For the purposes of the financial covenants contained in subsections (a) and (b) herein, the financial statements of Borrower's subsidiary, DirecTV Japan, Ltd. will be treated as consolidated with the financial statements of Borrower (whether or not required by GAAP) from the Effective Date through December 31, 2000, and thereafter (i) if such consolidation is required by GAAP or (ii) if Borrower or one or more of its Subsidiaries own securities of DirecTV Japan, Ltd. convertible into equity interests in DirecTV Japan, Ltd., which when combined with other equity interests owned by Borrower or one or more of its Subsidiaries, would result in Borrower and its Subsidiaries having more than a 50% interest in the profits or capital of DirecTV Japan, Ltd. SECTION 9 EVENTS OF DEFAULT 9.1 Events of Default. If one or more of the following described Events ----------------- of Default shall occur: (a) Borrower shall default in the due and punctual payment of (i) the principal of or the interest on any Loan within two Business Days of its due date, (ii) any fee due hereunder within 10 Business Days of its due date; or, (iii) any other amount due from it hereunder within 30 Business Days of its due date; or (b) Borrower or any of its Restricted Subsidiaries shall fail to perform or observe any of the terms, provisions, covenants, conditions, agreements or obligations contained herein (other than Section 7.3, and Sections 8.1 through 8.5,) and such failure shall continue for more than 20 days after written notice from Administrative Agent to Borrower of the existence and character of such failure to perform or observe; or (c) Borrower or any of its Restricted Subsidiaries shall fail to perform or observe any of the terms, provisions, covenants, conditions agreements or obligations contained in Section 7.3 and Sections 8.1 through 8.5; or (d) (i) Borrower, or any of its Restricted Subsidiaries shall become insolvent, or be unable, or admit in writing its inability, to pay its debts as they become due; or (ii) Borrower or any Restricted Subsidiary shall make an assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its properties or assets; or (iii) Borrower or any -33- Restricted Subsidiary shall file or have filed against it a petition in bankruptcy or seeking reorganization or to effect a plan or other arrangement with creditors or winding up or dissolution and such filing against it shall not be dismissed within 60 days after the date of such filing; or (iv) Borrower or any Restricted Subsidiary shall apply for or consent to the appointment of or consent that an order be made appointing any receiver or trustee for any of its or their properties, assets or business, or if a receiver or a trustee shall be appointed for all or a substantial part of its or their properties, assets or business; or (v) an order for relief shall be entered against Borrower or any Restricted Subsidiary under the United States federal bankruptcy laws as now or hereafter in effect; or (vi) Borrower or any Restricted Subsidiary shall take any action indicating its consent to, approval of or acquiescence in, any of the foregoing; or (e) Any representation or warranty made by Borrower herein or in any certificate or financial or other statement heretofore or hereafter furnished by Borrower or any of its officers to Administrative Agent or the Banks proves to be in any material respect false or misleading as of the date when made, deemed made or reaffirmed; or (f) Any final judgment, decrees, writs of execution, attachments or garnishments or any Liens, or any other legal processes shall be issued or levied against any of the assets or property of Borrower or any of its Restricted Subsidiaries (and shall not have been vacated, discharged or stayed) in amounts which in the aggregate would result in a Material Adverse Change (without limiting the generality of the foregoing, a judgment in excess of $75,000,000 in the aggregate shall, for purposes only of this Section 9.1(f), be deemed to result in a Material Adverse Change); provided, however, that such -------- ------- aggregate amount shall include only amounts in excess of (i) insurance coverage therefor and (ii) reserves on the books of Borrower or any of its Restricted Subsidiaries therefore; provided, further, that such aggregate amount shall not -------- ------- include any amounts with respect to matters subject to appeal conducted in good faith and diligently pursued or other further legal process by Borrower or any of its Restricted Subsidiaries or any amounts with respect to any such legal process which Borrower or any of its Restricted Subsidiaries has detached from such property by posting of a bond or equivalent process; or (g) All, or substantially all, of the assets and property of Borrower or any of its Restricted Subsidiaries shall be condemned, seized or otherwise appropriated; or (h) Any fact or circumstance (including without limitation a Reportable Event), which results in, or which Majority Banks determine in good faith could reasonably be expected to result in, the termination of any Plan of Borrower, any of its Subsidiaries or any ERISA Affiliate by the Pension Benefit Guaranty Corporation or the appointment by an appropriate United States District Court of a trustee to administer any such Plan, shall occur and shall continue for 30 days after written notice of such determination shall have been given to Borrower or any of its Subsidiaries by Administrative Agent, or a trustee shall be appointed by the appropriate United States District Court to administer any Plan of Borrower or any of its Subsidiaries, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any Plan of Borrower or any of its Subsidiaries or to appoint a trustee to administer any such Plan and, upon the occurrence of any of the foregoing, the aggregate amount of the unfunded vested liability for the benefits guaranteed by the Pension Benefit Guaranty Corporation under all such Plans and the present value of any Withdrawal Liability which remains unpaid is reasonably estimated to be in excess of $75,000,000 and such liability is not covered by insurance; or -34- (i) Borrower or any of its Restricted Subsidiaries (i) fails to make any payment (or otherwise satisfy) in respect of any indebtedness for money borrowed when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the document relating thereto on the date of such failure; or (ii) an event of default shall occur which permits the acceleration of indebtedness for money borrowed under any other agreement, contract, indenture, document or instrument executed, or which may be executed, by Borrower or any of its Restricted Subsidiaries, which failure or event of default has not been waived or cured; provided, however, that no Event of -------- ------- Default shall exist hereunder if the aggregate amount of the indebtedness which is not paid or may be accelerated with respect to the defaulted obligations shall not exceed in the aggregate $75,000,000; or (j) Any disposition of any Restricted Subsidiary shall have occurred, and: (i) prior to such disposition, either S&P or Moody's shall have publicly announced that Borrower's Debt Rating will be below Investment Grade after giving effect to such disposition; or (ii) as soon as reasonably practicable after its public announcement of such disposition, Borrower shall not have requested S&P and Moody's to publicly announce, prior to or no later than concurrently with the consummation of such disposition, that Borrower's Debt Rating will remain at least Investment Grade after giving effect to such disposition; or (iii) notwithstanding clause (ii), either S&P or Moody's shall not have publicly announced within 10 days after the consummation of such disposition that Borrower's Debt Ratings will remain at least Investment Grade after giving effect to such disposition; or (k) Any sale, spin-off, disposition or other transaction whereby General Motors Corporation will no longer beneficially own directly or indirectly at least 51 percent of the issued and outstanding capital stock of Borrower having voting power under ordinary circumstances to elect directors of Borrower (a "transaction") shall have occurred and: (i) prior to such transaction, either S&P or Moody's shall have publicly announced that its Debt Rating will be below Investment Grade after giving effect to such transaction; or (ii) as soon as reasonably practicable after its public announcement of such transaction, Borrower shall not have requested S&P and Moody's to publicly announce, prior to or no later than concurrently with the consummation of such transaction, that Borrower's Debt Rating will remain at least Investment Grade after giving effect to such transaction; or (iii) notwithstanding clause (ii), either S&P or Moody's shall not have publicly announced within 10 days after the consummation of such transaction that its Debt Ratings will remain at least Investment Grade after giving effect to such transaction; or -35- (l) This Agreement, at any time after its execution and delivery and for any reason other than the agreement of all Banks or satisfaction in full of all the duties and obligations hereunder, ceases to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect; or Borrower denies that it has any or further liability or obligation under this Agreement, or purports to revoke, terminate or rescind this Agreement. Then (a) automatically upon the occurrence of an Event of Default under Section 9.1(d), the Commitments shall immediately terminate, and all Loans and other liabilities and obligations outstanding under this Agreement shall, without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived, be forthwith due and payable, if not herein otherwise then due and payable, together with all costs and expenses (including break and funding costs and other costs in connection with the relending, reborrowing, funding or other employing of funds) incurred by the Banks as a result thereof, anything herein or in any agreement, contract, indenture, document or instrument contained to the contrary notwithstanding; and (b) at any time after the occurrence of an Event of Default other than under Section 9.1(d), and in each and every such case, unless such Event of Default shall have been remedied by Borrower to the satisfaction of Majority Banks or waived in writing by Majority Banks (except in the case of an Event of Default under Section 9.1(a), the waiver of which shall require the consent of all the Banks), Administrative Agent may, with the consent of the Majority Banks, or shall, upon the direction of Majority Banks, immediately terminate the Commitments, whereupon the same shall be cancelled and reduced to zero and any Loan Request given in respect of a Borrowing Date occurring on or after the date of such notice of cancellation shall cease to have effect and all Loans and all accrued interest thereon and all other liabilities and obligations outstanding under this Agreement shall, thereupon, without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived, be forthwith due and payable, if not otherwise then due and payable, together with all reasonable costs and expenses (including break and funding costs and other costs in connection with the relending, reborrowing, funding or other employing of funds) incurred by the Banks as a result thereof, anything herein or in any other agreement, contract, indenture, document or instrument contained to the contrary notwithstanding. Thereafter any Bank or the Banks may immediately, and without expiration of any period of grace, enforce payment of all liabilities and obligations of Borrower under this Agreement. 9.2 Recovery of Amounts Due. If any amount payable hereunder is not paid ----------------------- as and when due, Borrower hereby authorizes Administrative Agent, each Bank and their respective affiliates to proceed, to the fullest extent permitted by applicable law, without prior notice, by right of set-off, banker's lien or counterclaim, against any moneys or other assets of Borrower in any currency that may at any time be in the possession of Administrative Agent or any of its affiliates or such Bank or any of its affiliates, at any branch or office thereof, to the full extent of all amounts payable to Administrative Agent and the Banks hereunder. Any Bank that so proceeds or that has an affiliate that so proceeds shall forthwith give notice to Administrative Agent of any action taken by such Bank or affiliate pursuant to this Section 9.2. 9.3 Rights Cumulative. The rights of Administrative Agent and the Banks ----------------- provided for herein are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity. -36- SECTION 10 THE BANKS 10.1 Administration of Loan. The general administration of the Loans shall ---------------------- be by Administrative Agent and shall be governed by the provisions set forth in Exhibit C attached hereto and incorporated herein by reference. 10.2 Representations By Banks. Each Bank hereby represents that it will ------------------------ make each Loan hereunder in the ordinary course of its business and not with a view to engage in any distribution of any evidence of indebtedness to the public and any participation or disposition of the Master Bid Rate Note shall not, without the consent of Borrower, require Borrower to file a registration statement with the Securities and Exchange Commission or apply to qualify any Master Bid Rate Note under the blue sky law of any state; provided, however, -------- ------- disposition of any evidence of indebtedness held by such Bank shall at all times be within its exclusive control subject only to the provisions of Section 11.11 and Section 10 of Exhibit C. SECTION 11 MISCELLANEOUS PROVISIONS 11.1 Amendments and Waivers. No amendment or waiver of any provision of ---------------------- this Agreement, and no consent with respect to any departure by Borrower therefrom, shall be effective unless the same shall be in writing and signed by Majority Banks (or by the Administrative Agent at the written request of Majority Banks) and the Borrower and acknowledged by Administrative Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such -------- ------- waiver, amendment, or consent shall, unless in writing and signed by all the Banks and Borrower and acknowledged by Administrative Agent, do any of the following: (a) increase or extend the Commitment of any Bank (or reinstate any Commitment terminated pursuant to Section 9.1); (b) postpone or delay any date fixed by this Agreement for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder; (c) reduce the principal of, or the rate of interest specified herein on any Loan, or any fees or other amounts payable hereunder; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Banks or any of them to take any action hereunder; or (e) amend this Section or any provision herein providing for consent or other action by all Banks; provided, further, that no amendment, waiver or consent shall, unless in writing - -------- ------- and signed by Administrative Agent in addition to Majority Banks or all Banks, as the case may be, affect the rights or duties of Administrative Agent under this Agreement or rights or privileges thereunder. 11.2 Notices. All notices, payments, requests, reports, information, ------- demands and other communications which any party hereto may desire, or may be required, to give or make to any other party hereto, shall (unless otherwise permitted as a telephonic notice or request hereunder) be given by mailing the same, postage prepaid, or by telex, or rapifax transmission, or by hand delivery or courier, to each party at its address set forth in Exhibit D attached hereto and incorporated herein by reference, or to such other address as may, from time to time, be specified in writing by Borrower or any Bank. Such communications shall be deemed to have been duly given and received in the case of a telex, when the telex is sent and the appropriate answer-back -37- is received, in the case of mail when sent by pre-paid certified or registered mail correctly addressed to the addressee, in the case of rapifax transmission, when transmission has been sent, and in the case of hand delivery or courier, when received. Administrative Agent may rely and act upon any Loan Request made by telex or other telexed, telephonic or facsimile instructions to Administrative Agent by any Person purporting to be an authorized Person of Borrower, and Borrower shall be unconditionally and absolutely estopped from denying the authenticity and validity of any transaction or act made by Administrative Agent or any Bank in reliance thereon. Each party hereto shall promptly confirm by telex or rapifax any telephone communication made by it to another pursuant to this Agreement but the absence of such confirmation shall not affect the validity of such communication, which shall be effective upon receipt. If there is any conflict between any telephonic communication and a written confirmation, the written communication shall govern; provided, however, -------- ------- that the recipient of such communication shall be held harmless by all parties hereto with respect to any action taken in reliance on the telephonic communication prior to the time such recipient receives and has had reasonable time to review the subsequent written confirmation and initiate such corrective action as the recipient deems reasonable under the circumstances. 11.3 Waiver. Neither the failure of, nor any delay on the part of, any ------ party hereto in exercising any right, power or privilege hereunder, or under any agreement, contract, indenture, document or instrument mentioned herein, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder, or under any agreement, contract, indenture, document or instrument mentioned herein, preclude other or further exercise thereof or the exercise of any other right, power or privilege; nor shall any waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned herein, constitute a waiver of any other right, power, privilege or default or constitute a waiver of any other default of the same or of any other term or provision. All rights and remedies herein provided are cumulative and not exclusive of any rights or remedies otherwise provided by law. 11.4 California Law. The interpretation, enforcement and effect of this -------------- Agreement, the Loans and any agreements, contracts, indentures, documents or instruments delivered in accordance herewith, shall be governed and controlled in all respects by and construed according to the substantive laws of the State of California, to the jurisdiction of whose courts the parties hereto hereby agree to submit. 11.5 Headings. The headings set forth herein are solely for the purpose of -------- identification and shall not be construed as a part of the sections or subsections which they head. 11.6 Accounting Terms. All accounting terms not otherwise defined herein ---------------- have the meaning assigned to them in accordance with GAAP, provided, however, any act or condition in accordance herewith and permitted hereunder when taken, created or occurring, shall not become a violation of any section of this Agreement as a result of a subsequent change in GAAP. 11.7 Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the different parties hereto on separate counterparts, and all of said counterparts taken together shall constitute one and the same instrument. -38- 11.8 Written Disclosure. Wherever written disclosure by Borrower to Banks ------------------ is required or permitted by this Agreement, written disclosure to Administrative Agent by Borrower shall constitute such disclosure. 11.9 Singular; Plural. Whenever used herein, the singular number shall ---------------- include the plural, the plural the singular, and the use of any gender shall be applicable to all genders. 11.10 Illegality. The illegality or unenforceability of any provision of ---------- this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 11.11 Assignments. This Agreement shall bind and inure to the benefit of ----------- the parties hereto and their respective successors and assigns. No party hereto may assign or transfer all or any part of its rights and obligations hereunder, except that: (a) Any Bank may, with the prior written consent of Borrower at all times other than during the existence of an Event of Default, and Administrative Agent, which consents shall not be unreasonably withheld, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of -------- Borrower or the Administrative Agent shall be required in connection with any assignment and delegation by Bank to an Approved Bank Affiliate of such Bank or another Bank) (each an "Assignee") by execution and delivery to, and acceptance by, the Administrative Agent of a Notice of Assignment and Acceptance, all, or any ratable part of all, of the Loans, the Commitments and the other rights and obligations of such Bank hereunder; provided, however, that any assignment to an -------- ------- Eligible Assignee which is not a Bank or an Approved Bank Affiliate shall be in an amount not less than the lesser of $5,000,000 or all, but not less than all, of the Loans, the Commitment and the other rights and obligations of such Bank hereunder. Upon execution of a Notice of Assignment and Acceptance by such Eligible Assignee in which it agrees to abide by all of the terms, conditions and obligations applicable to a Bank herein and to have a Commitment as specified in such agreement, such Eligible Assignee shall be deemed a Bank hereunder to the same extent as if it were a signatory hereto and, thereafter, such Eligible Assignee shall for all purposes be considered a "Bank" hereunder. Administrative Agent shall be entitled to a $2,500 processing fee, payable by the assignor, with respect to any such assignment by a Bank. (b) Subject to Section 11.16, Borrower authorizes each Bank and the Arrangers to disclose to any prospective assignee and assignee any and all information in such Bank's or the Arrangers' possession concerning Borrower, this Agreement and any collateral. (c) Notwithstanding anything to the contrary contained herein, any Bank (a "Granting Bank") may grant to a special purpose funding vehicle (an "SPC"), ------------- --- identified as such in writing from time to time by the Granting Bank to Administrative Agent and Borrower, the option to provide to Borrower all or any part of any Loan that such Granting Bank would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall -------- constitute a commitment by any SPC to make any Loan, (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Bank shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC -39- hereunder shall utilize the Commitment of the Granting Bank to the same extent, and as if, such Loan were made by such Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Bank). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section, any SPC may (i) with notice to, but without the prior written consent of, Borrower and Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Bank or to any financial institutions (consented to by Borrower and Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) subject to the provisions of Section 11.16 hereof, disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. This section may not be amended without the written consent of the SPC. 11.12 Obligations Several. The obligations of each Bank under this ------------------- Agreement are several. Neither Administrative Agent nor any Bank shall be liable for the failure of any other Bank to perform its obligations under this Agreement. 11.13 Participations. Any Bank may at any time sell, or grant -------------- participations in all or part of its Commitment or any Loan or Loans made to Borrower under this Agreement to any other Person, other than an individual, (a "Participant"); provided, however, no Bank may be relieved of its obligations under this Agreement except with the consent of Borrower and Administrative Agent. Any such sale or grant of a participation is subject to the following conditions: (a) Administrative Agent and Borrower may, for all purposes of this Agreement, deem and treat a Bank party to this Agreement as the owner of such Bank's Loans hereunder for all purposes hereof until a written notice of the sale or participation shall have been received by Administrative Agent, together with Borrower's consent to treat such Participant as owner of such Loan. (b) Subject to Section 11.16, Borrower authorizes each Bank and the Administrative Agent to disclose to any prospective Participant and to any Participant any and all information in such Bank's or the Administrative Agent's possession concerning Borrower, this Agreement and any collateral. (c) Any agreement pursuant to which a Bank grants a participation in its rights with respect to any Loan or Loans shall provide that, with respect to any such Loan or Loans, such Bank shall retain the sole right and responsibility to exercise the rights of a Bank under this Agreement including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement and the right to take action to declare any amount due -40- and payable pursuant to Section 9; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement without the consent of the Participant if such modification, amendment or waiver would (i) increase the amount of the Total Commitment or change the Commitment of such Bank, (ii) reduce interest, principal or fees owing to such Bank hereunder, (iii) extend the fixed date on which any sum is due hereunder, or (iv) release or subordinate any material portion of collateral. (d) Except as provided in this Section 11.13, no recipient of a participation in a Loan or Loans of any Bank shall have any rights under this Agreement other than to receive payment of principal of, and interest on the Loans and of such other amounts as Banks are entitled to receive pursuant to Sections 3.1, 3.2, 3.3, and 3.4 of this Agreement; provided, however such recipients shall be entitled to receive pursuant to Sections 3.1, 3.2 and 3.3 only the lesser of (i) the amount that the Bank from which the recipient received its participation would have received had such Bank not transferred an interest in its Loans to such recipient and (ii) the additional costs actually incurred by such recipient; and any demand by a Participant for payment hereunder shall certify that the amount demanded does not exceed the amount Participant is entitled to receive under this subsection (d). (e) Notwithstanding any other provision set forth in this Agreement, any Bank may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Loans owing to it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. 11.14 Fees and Expenses. Borrower agrees to pay on demand (a) to ----------------- Administrative Agent all reasonable costs, expenses and attorneys' fees (including allocated costs for in-house legal services) incurred by Administrative Agent and the Arrangers in connection with the preparation and administration of this Agreement and any documents including any amendments, waivers, or other modifications and (b) all reasonable costs, expenses and attorneys' fees (including allocated costs for in-house legal services) incurred by Administrative Agent and Banks in connection with the enforcement of this Agreement and any instrument or agreement required hereunder and in connection with any refinancing or restructuring of the Loans in the nature of a "work- out"; provided, however that, in addition to costs of Administrative Agent's in- house counsel, Borrower shall be obligated to pay for the costs of no more than one counsel for Administrative Agent and all Banks (without prejudice to any Bank's right to engage additional counsel at its own cost and expense) unless any Bank shall in good faith reasonably determine that there is a conflict of interest that causes it to be reasonably necessary for such Bank to be represented by separate counsel. 11.15 Indemnity. Borrower agrees to indemnify the Administrative Agent, --------- the Arrangers, the Syndication Agent, the Documentation Agents, each Bank and their respective directors, officers, agents and employees (collectively, the "Indemnitees") from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses, including settlement costs) reasonably incurred by any of them arising out of or by reason of any investigation by governmental or judicial authorities or being made a party to any litigation or other similar proceeding related to any use made or proposed to be made by Borrower of the proceeds of any Loan for the acquisition of any other Person (other than with respect to a particular Indemnitee's losses, liabilities, claims, damages or expenses incurred as a result of -41- such Indemnitee's gross negligence or willful misconduct), including, without limitation, the reasonable fees and disbursements of counsel (including allocated costs for in-house legal services) incurred in connection with any such investigation, litigation or other proceeding; provided, however, that -------- ------- Borrower shall have no obligation to indemnify or pay for the costs and expenses of more than one counsel for the Indemnitees, unless any Indemnitee shall in good faith reasonably determine that there is a conflict of interest that causes it to be reasonably necessary for any Indemnitees to be represented by other counsel. Counsel chosen to represent any Indemnitee pursuant to the previous sentence shall be reasonably satisfactory to Borrower. The obligations of Borrower under this Section shall survive the termination of this Agreement. 11.16 Confidentiality. In consideration of Borrower furnishing Confidential --------------- Information(as defined below) to the Banks, the Arrangers, Administrative Agent, Syndication Agent and Documentation Agents, (collectively, the "Recipients") and their respective directors, officers and employees (collectively, the "Representatives"), each Recipient agrees for itself that: (a) Such Recipient shall keep the Confidential Information confidential and shall not, without Borrower's prior written consent, disclose it in any manner whatsoever, in whole or in part, and shall not use the Confidential Information other than in connection with this Agreement. Each Recipient agrees to reveal the Confidential Information only to its Representatives, bank affiliates, auditors, counsel and other advisors, representatives or agents who need to know the Confidential Information for the purpose of this Agreement, who are informed by such Recipient of the confidential nature of the Confidential Information and who shall agree to act in accordance with the terms and conditions of this section. Each Recipient shall be responsible for any breach of this Section by its Representatives. (b) Without Borrower's prior written consent, no Recipient shall disclose to any Person the fact that the Confidential Information has been made available or any other facts with respect to this Agreement. (c) Upon payment in full of all obligations owing to a Recipient and termination of such Recipient's Commitments, if any, hereunder, copies of the Confidential Information shall be returned by such Recipient to Borrower immediately upon its request, except for that portion of the information which consists of analyses, compilations, forecasts, studies or other documents prepared by such Recipient or its Representatives based on Confidential Information, which portion shall either be destroyed (as evidenced by a certificate of destruction signed by a duly authorized offer of such Recipient) or held by such Recipient and kept confidential and subject to the terms of this section; provided that such Recipient shall not be required to return or destroy -------- Confidential Information to the extent such Recipient reasonably determines that its retention of such Confidential Information is required by applicable law or regulation.. Any oral Confidential Information shall continue to be subject to the terms of this Section. (d) Confidential Information shall not include such portions of the information furnished to a Recipient which (i) are or become generally available to the public other than as a result of a disclosure by such Recipient or its Representatives in violation of this Agreement, (ii) become available to such Recipient on a non-confidential basis from a source (other than Borrower or its Representatives) which is not known by such Recipient to be prohibited from disclosing such information to such Recipient, or (iii) were in such Recipient's possession prior to being -42- furnished to such Recipient or its Representatives provided that the source of such information was not known by such Recipient to be prohibited from disclosing the information to such Recipient. (e) Subject to Section 6.15 and except as otherwise expressly set forth in this Agreement. each Recipient acknowledges that neither Borrower nor any of its Representatives makes any express or implied representation or warranty as to the accuracy or completeness of the information furnished to such Recipient, and that neither Borrower nor any of its Representatives shall have any liability resulting from the use of the information furnished to any Recipient, errors therein or omissions therefrom. (f) In the event any Recipient or any person to whom it transmits the Confidential Information pursuant to this Agreement becomes legally compelled to disclose any of the information, such Recipient shall, to the extent permitted by law, provide Borrower with prompt written notice thereof so that the Borrower may seek a protective order or other appropriate remedy and/or waiver such Recipient's compliance with the provisions of this section, In the event that such protective order or other remedy is not obtained, or that Borrower waives any Recipient's compliance with the provisions of this section, such Recipient may furnish only that portion of the Confidential Information which it is advised by written opinion of counsel that the disclosure thereof is legally required, and shall exercise its best efforts to obtain reliable assurance that confidential treatment will be accorded the Confidential Information so disclosed. (g) Notwithstanding the foregoing, a Recipient may (i) disclose any Confidential Information to bank examiners; (ii) use any Confidential Information in connection with the management, supervision and enforcement of this Agreement, including the enforcement of such Recipient's rights under any agreement executed in connection therewith; (iii) disclose any Confidential Information in connection with any litigation or dispute involving any such Person or the Borrower and related to this Agreement or to any use of proceeds of the Loans; (iv) disclose any Confidential Information to other Recipients; and (v) disclose Confidential Information to prospective assignees and Participants and assignees and Participants pursuant to Sections 3.8, 11.11(b) and 11.13(b); provided, further, that in each of the foregoing cases, such Person shall use its best efforts to ensure that any such disclosure will be made under procedures reasonably calculated to maintain the confidentiality of such Confidential Information. For purposes of this Section, "Confidential Information" means information relating to the business, operation or technology of Borrower or its affiliates which Borrower has furnished to the Banks, the Arrangers, Administrative Agent, Syndication Agent, Documentation Agents or their Representatives which is either non-public, confidential or proprietary in nature, together with copies and other reproductions thereof, and analyses, compilations, forecasts, studies or other documents prepared by any Banks or its Representatives which contain or otherwise reflect such information. This section shall survive termination of the Agreement. 11.17 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT -------------------------------- HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR -43- IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 11.18 New Banks; Increases in Commitments of Banks. (a) In the event one -------------------------------------------- or more Banks do not consent to an extension of the Termination Date pursuant to Section 2.13, if no Event of Default or Unmatured Event of Default has occurred and is continuing, Borrower may within five days of Borrower's receipt of notice of such failure to so extend notify Administrative Agent and the Banks (a "Commitment Replacement Notice") that (i) it desires to add one or more additional lenders to the Banks hereunder having aggregate Commitments not exceeding the Commitment of the Bank(s) which have not consented to an extension, and/or (ii) with the consent of the relevant Bank(s), increase the Commitment of any one or more of the Banks in an aggregate amount not exceeding the Commitment of the Bank(s) which have not consented to an extension of the Termination Date; provided that the existing Bank(s) shall have the right on a -------- pro rata basis based upon the then existing Commitments to increase their respective Commitments to replace the terminated Commitments before any New Bank may be added as a Bank hereunder. The Banks desiring to increase their Commitments based upon the immediately preceding proviso must give notice to Administrative Agent of their intention to accept a greater Commitment within five days of Borrower's Commitment Replacement Notice. Each Commitment Replacement Notice shall identify each new lender (each a "New Bank") proposed by Borrower to be added as a Bank and/or each existing Bank which has proposed to increase its Commitment, the amount of its proposed Commitment and the proposed effective date of its becoming a Bank hereunder or increasing its Commitment, as applicable (which shall be the last day of all then current Interest Periods if there are Eurodollar Advances then outstanding from the Banks). Any increase in the Commitment of a Bank shall be effective upon the receipt by Administrative Agent of a commitment increase letter in the form of Exhibit H hereto which shall identify the proposed effective date (which shall be the last day of all then current Interest Periods if there are Eurodollar Advances then outstanding from the Banks). Each New Bank shall, with the consent of Administrative Agent, become a Bank hereunder for all purposes and to the same effect as if set forth on the signature pages hereof, subject to its execution and delivery to Administrative Agent of at least one counterpart of this Agreement (which shall be deemed to include all amendments thereto) and the execution and delivery by Administrative Agent and Borrower of each such counterpart. Each Bank expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Bank hereunder, nor by any election of Administrative Agent not to authorize a lender to become a New Bank. 11.19 (b) Following any Bank's or Banks' refusal to extend their Commitments pursuant to Section 2.13 herein and/or any subsequent change in the Commitments of the existing Banks or the addition of a New Bank, Schedule 1 of this Agreement shall be deemed -44- amended to reflect (i) the termination of the non-extending Bank's Commitment; (ii) the addition of any New Bank; (iii) such New Bank's Commitment; and (iv) any change to the Commitment of an existing Bank. 11.20 (c) Following any Bank or Banks refusal to extend their Commitments pursuant to Section 2.13 herein and any subsequent change in the Commitments of the existing Banks or the addition of a New Bank, Borrower agrees to execute such Notes as necessary to comply with the requirements of Sections 2.8 and 2.9 of this Agreement. [Remainder of page intentionally left blank] -45- IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto in Los Angeles, California as of the date first hereinabove written. HUGHES ELECTRONICS CORPORATION By: __________________________________________ Name: Title: S-1 BANK OF AMERICA, N.A., as Administrative Agent By: __________________________________________ Name: Title: S-2 CITICORP USA, INC., as Syndication Agent and as a Bank By: __________________________________________ Name: Title: S-3 DEUTSCHE BANK AG, NEW YORK BRANCH, as Documentation By: __________________________________________ Name: Title: S-4 ALLFIRST BANK By: ____________________________________ Name: Title: S-5 BANCA DI ROMA - SAN FRANCISCO By: ____________________________________ Name: Title: S-6 BANK OF AMERICA, N.A., as a Bank By: ____________________________________ Name: Title: S-7 THE BANK OF NEW YORK By: ____________________________________ Name: Title: S-8 BANK ONE, NA By: ____________________________________ Name: Title: S-9 BARCLAYS BANK PLC By: ____________________________________ Name: Title: S-10 BANQUE NATIONALE DE PARIS By: ____________________________________ Name: Title: By: ____________________________________ Name: Title: S-11 BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH By: ____________________________________ Name: Title: S-12 CREDIT SUISSE FIRST BOSTON By: ____________________________________ Name: Title: By: ____________________________________ Name: Title: S-13 DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR CAYMAN ISLAND BRANCHES, as a Bank By: ____________________________________ Name: Title: By: ____________________________________ Name: Title: S-14 THE FUJI BANK, LIMITED By: ____________________________________ Name: Title: S-15 MELLON BANK, N.A. By: ____________________________________ Name: Title: S-16 THE MITSUBISHI TRUST AND BANKING CORPORATION, NEW YORK BRANCH By: ____________________________________ Name: Title: S-17 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: ____________________________________ Name: Title: S-18 SOCIETE GENERALE By: ____________________________________ Name: Title: S-19 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH By: ____________________________________ Name: Title: By: ____________________________________ Name: Title: S-20 SCHEDULE 1 BANKS AND COMMITMENTS
Bank Commitment Normal Percentage ---- ---------- ----------------- Bank of America, N.A. $ 44,000,000 12.5714% Citicorp USA, Inc. $ 44,000,000 12.5714% Deutsche Bank AG, New York $ 35,000,000 10.0000% and/or Cayman Islands Branches Barclays Bank PLC $ 22,000,000 6.2857% Bank One, NA $ 22,000,000 6.2857% Bayerische Landesbank $ 22,000,000 6.2857% Girozentrale, Cayman Islands Branch Societe Generale $ 22,000,000 6.2857% Credit Suisse First Boston $ 22,000,000 6.2857% Banque Nationale de Paris $ 22,000,000 6.2857% Morgan Guaranty Trust Company $ 17,500,000 5.0000% of New York Mellon Bank, N.A. $ 15,000,000 4.2857% Banca di Roma--San Francisco $ 15,000,000 4.2857% The Mitsubishi Trust and $ 12,500,000 3.5714% Banking Corporation, New York Branch Westdeutsche Landesbank $ 8,750,000 2.5000% Girozentrale, New York Branch Bank of New York $ 8,750,000 2.5000% Allfirst Bank $ 8,750,000 2.5000% The Fuji Bank, Limited $ 8,750,000 2.5000% Total $350,000,000 100.0000%
-1- EXHIBIT A-1 LOAN REQUEST TO: Bank of America, N.A., as Administrative Agent for Banks FROM: Hughes Electronics Corporation DATE: RE: Hughes Electronics Corporation - Revolving Credit Agreement (364-day Facility) Ladies and Gentlemen: 1. We refer to the Revolving Credit Agreement (364-day Facility) dated as of November 24, 1999 and made among Hughes Electronics Corporation, the banks parties thereto ("Banks"), Bank of America, N.A., as administrative agent for the Banks (in such capacity "Administrative Agent"), Citicorp USA, Inc., as Syndication Agent and Deutsche Bank AG, New York Branch as Documentation Agent (the "Agreement"). Terms defined in the Agreement shall have the same meaning herein. 2. We hereby request that a [Base Rate Loan] [Eurodollar Loan] is made to us as follows: (i) Principal Amount: (ii) Borrowing Date: (iii) Interest Period (if a Eurodollar Loan): 3. For the purposes of inducing the Banks to make the Loan requested herein, we confirm that, pursuant to Section 5.3 of the Agreement, as of the date hereof: (i) the representations and warranties set out in Section 6 of the Agreement (with the exception of Section 6.6) are true and correct in all material respects; (ii) the most current financial statements delivered pursuant to Section 7.5 of the Agreement present fairly the financial position and results of operation and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such A-1-1 LOAN REQUEST statements relate as of the date thereof (subject, in the case of unaudited financial statements, to year end adjustments); and (iii) no Event of Default or Unmatured Event of Default has occurred and is continuing. HUGHES ELECTRONICS CORPORATION By:_____________________________ Name: Title: A-1-2 LOAN REQUEST EXHIBIT A-2 LOAN REQUEST - BID RATE LOANS TO: Bank of America, N.A., as Administrative Agent for Banks FROM: Hughes Electronics Corporation DATE: RE: Hughes Electronics Corporation - Revolving Credit Agreement (364-day Facility) Ladies and Gentlemen: 1. We refer to the Revolving Credit Agreement (364-day Facility) dated as of November 24, 1999 and made among Hughes Electronics Corporation, the banks parties thereto ("Banks"), Bank of America, N.A., as administrative agent for the Banks (in such capacity "Administrative Agent"), Citicorp USA, Inc., as Syndication Agent and Deutsche Bank AG, New York Branch as Documentation Agent (the "Agreement"). Terms defined in the Agreement shall have the same meaning herein. 2. We hereby give you notice pursuant to Section 2.4 of the Revolving Credit Agreement that we request offers for the following proposed Bid Rate Loans: (i) Borrowing Date: (ii) Principal Amount: (iii) Interest Period(s): Each Bid Rate Loan offer should specify an amount, the Interest Period and the Bid Rate upon which each Bank desires to advance a Bid Rate Loan. 3. For the purposes of inducing the Banks to make the Loan requested herein, we confirm that, pursuant to Section 5.3 of the Agreement, as of the date hereof: (i) the representations and warranties set out in Section 6 of the Agreement (with the exception of Section 6.6) are true and correct in all material respects; (ii) the most current financial statements delivered pursuant to Section 7.5 of the Agreement present fairly the financial position and results of operation and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such A-2-1 LOAN REQUEST - BID RATE LOANS statements relate as of the date thereof (subject, in the case of unaudited financial statements, to year end adjustments); and (iii) no Event of Default or Unmatured Event of Default has occurred and is continuing. HUGHES ELECTRONICS CORPORATION By:__________________________________ Name: Title: A-2-2 LOAN REQUEST - BID RATE LOANS EXHIBIT B MASTER BID RATE NOTE Los Angeles, California [Date] HUGHES ELECTRONICS CORPORATION, a Delaware corporation (the "Borrower"), for value received, hereby promises to pay to the order of _____________________ (the "Bank"), at Bank of America, N.A., as Administrative Agent (Attention: Agency Administrative Services-West), 1850 Gateway Blvd., Concord, California 94520, on the dates specified in the Credit Agreement (as herein defined), in lawful money of the United States, the total unpaid principal amount of all Bid Rate Loans made by Bank to Borrower from the date of this Note through the Termination Date pursuant to the Credit Agreement. This Note shall bear interest as set forth in the Credit Agreement for Bid Rate Loans. Interest payable under this Note shall be payable at the times specified in the Credit Agreement. This Note is one of the Master Bid Rate Notes referred to in the Revolving Credit Agreement (364-Day Facility) dated as of November 24, 1999 and made among Hughes Electronics Corporation, the banks parties thereto ("Banks"), Bank of America, N.A., as administrative agent for the Banks (in such capacity "Administrative Agent"), Citicorp USA, Inc., as Syndication Agent and Deutsche Bank AG, New York Branch as Documentation Agent (the "Agreement"), and is subject to prepayment in whole or in part and its maturity is subject to acceleration upon the terms provided in the Credit Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of California. All Bid Rate Loans made by Bank to Borrower pursuant to the Credit Agreement and all payments of principal thereof may be indicated by Bank upon the grid attached hereto which is a part of this Note. Such notations shall be presumptively correct as to the aggregate unpaid principal amount of all Bid Rate Loans made by Bank pursuant to the Credit Agreement. HUGHES ELECTRONICS CORPORATION By: _____________________________ Name: Title: B-1 MASTER BID RATE NOTE Bid Rate Loans and Payments of Principal
- ----------------------------------------------------------------------------------------- Unpaid Amount of Interest Interest Amount of Principal Name of Person Date Loan Period Rate Principal Paid Balance Marking Notation - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------
B-2 MASTER BID RATE NOTE EXHIBIT C RELATIONS AMONG THE BANKS AND AGENTS 1. Administration of the Credit. Payment of interest and principal on ---------------------------- the Loans and the facility fee and all other amounts payable by Borrower hereunder shall be made by Borrower in immediately available funds, directly to each Bank in the case of amounts payable under Sections 3.1, 3.2 and 3.3 and, in all other cases, to Administrative Agent, and Administrative Agent shall promptly distribute to the other Banks in immediately available funds their shares of principal, interest and fees and to each Bank as provided herein such other amounts as paid by Borrower. 2. Pro Rata Distribution. All facility fees will be divided among the --------------------- Banks in accordance with their Normal Percentage, and interest and principal payments on each Loan will be divided pro rata among Banks in accordance with their percentage interest in the Loan. 3. Right of Setoff. Any Bank which shall receive payment of or on --------------- account of all or part of its share of the Loans through the exercise of any right of setoff, counterclaim, or banker's lien, or otherwise in a greater proportion than the proportionate amount of principal and interest due it under this Agreement immediately prior to such payment shall purchase a ratable proportion of the portions of the Loan held by the other Banks so that all recoveries of principal and interest shall be shared by the Banks in accordance with their pro rata interests in the Loans outstanding hereunder. If all or any portion of such excess payment is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Any sum received by Bank through exercise of the right of setoff, counterclaim, or banker's lien shall be deemed to be first applied to such Bank's portion of the indebtedness under this Agreement, second as herein above provided and any balance remaining thereafter shall be deemed applied to any other indebtedness of Borrower to such Bank. 4. Notice of Event of Default. Upon receipt by Administrative Agent from -------------------------- Borrower of any communication calling for an action on the part of Banks, or upon notice to Administrative Agent of an Unmatured Event of Default or an Event of Default, it will in turn promptly inform the other Banks in writing of the nature of such communication or of the Unmatured Event of Default or Event of Default, as the case may be. 5. Actions by Administrative Agent. Upon any occasion requiring or ------------------------------- permitting an approval, consent, election or other action on the part of Banks, action shall be taken by Administrative Agent for and on behalf or for the benefit of all Banks upon the direction of the required number of Banks and the Administrative Agent, if applicable, as set forth in Section 11.1 of the Agreement. 6. Several Liability of Banks. The obligation of each Bank hereunder is -------------------------- several, and the failure of one Bank to perform hereunder shall in no way relieve the other Banks from performance. 7. Liability of Administrative Agent. Administrative Agent shall not be --------------------------------- liable or answerable for anything whatsoever in connection with this Agreement except for its willful C-1 RELATIONS AMONG THE BANKS AND THE AGENT misconduct or gross negligence, and Administrative Agent shall have no duties or obligations other than as provided herein. Administrative Agent shall be entitled to rely on any opinion of counsel (including counsel for Borrower) in relation to this Agreement, and upon statements and communications received from Borrower, or from any other person, believed by it to be authentic, and shall not be liable for any action taken or omitted in good faith on such reliance. 8. Indemnification of Administrative Agent. Each Bank agrees to --------------------------------------- indemnify Administrative Agent (to the extent not reimbursed by Borrower and without limiting the obligation of Borrower to do so), ratably according to its Normal Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by Administrative Agent under this Agreement except for Administrative Agent's gross negligence or willful misconduct. The obligations of the Banks under this Section 8 shall survive termination of the Agreement. 9. Rights of Administrative Agent as Bank. With respect to its -------------------------------------- obligation to lend under this Agreement and the Loans made by it, Bank of America shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not Administrative Agent; and the term "Banks" shall include Bank of America in its individual capacity. Bank of America may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with Borrower as if it were not Administrative Agent. 10. Assignment by Bank of its Obligations. Administrative Agent may deem -------------------------------------- and treat a Bank party to this Agreement as the owner of such Bank's portion of the Loans for all purposes hereof unless and until a written notice of the assignment or transfer of such Bank's obligations otherwise permitted under the Agreement executed by such Bank shall have been received by Administrative Agent, together with Borrower's consent to such assignment or transfer and such other documentation from such Bank and its assignee or transferee as Administrative Agent may reasonably request. 11. Representations by Banks. Neither Administrative Agent nor any Bank ------------------------ has made or makes to any other Bank any representation, and neither Administrative Agent nor any Bank assumes any responsibility, in respect to the execution, construction or enforcement of this Agreement or any other instrument or agreement executed by Borrower or by any other person or entity. 12. Independent Investigation by Banks. Each Bank has made and shall ---------------------------------- continue to make its own independent investigation of the financial condition and affairs of Borrower in connection with the making and the continuance of the Loans and has made and covenants that it shall continue to make its own appraisal of the creditworthiness of Borrower. Each Bank agrees Administrative Agent has no duty or responsibility, either initially or on a continuing basis, to provide any Bank with any credit or other information with respect to Borrower, whether coming into its possession before the making of the Loans or at any time or times thereafter except as expressly provided in this Agreement. C-2 RELATIONS AMONG THE BANKS AND THE AGENT 13. Successor Administrative Agent. Administrative Agent shall have the ------------------------------ right, at any time, to resign as Administrative Agent for the Banks hereunder. Such resignation shall not be effective until a successor Administrative Agent chosen by Majority Banks, and accepted by Borrower, shall accept appointment as Administrative Agent for the Banks hereunder. If no successor Administrative Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment, within 30 days after the retiring Administrative Agent has given notice of resignation, the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent reasonably acceptable to Borrower, which successor Administrative Agent shall be a commercial bank organized under the laws of the United States of America or a State thereof having a combined capital and surplus of at least $100,000,000. Upon the acceptance by the successor Administrative Agent of its appointment hereunder, the successor Administrative Agent shall succeed to and become vested with all the rights and obligations of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its obligations under this Agreement. The provisions of this Article shall inure to the benefit of the retiring Administrative Agent as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Exhibit C and Section 11.14 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. 14. Syndication Agent; Documentation Agents. None of the Banks identified --------------------------------------- on the facing page or signature pages of this Agreement as Syndication Agent or Documentation Agents shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Banks as such. Without limiting the foregoing, none of the Banks so identified shall have or be deemed to have any fiduciary relationship with any Bank. Each Bank acknowledges that it has not relied, and will not rely, on any of the Banks so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. C-3 RELATIONS AMONG THE BANKS AND THE AGENT EXHIBIT D LENDING OFFICES OF BANKS AND ADDRESSES FOR NOTICES BORROWER 200 North Sepulveda Blvd. P.O. Box 956 ES, 001, A148 El Segundo, CA 90245-0956 BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT Bank of America N.A. Mail Code: CA9-706-11-03 555 South Flower Street, 11th Floor Los Angeles, California 90071 Attention: Gina Meador Vice President Agency Management-Los Angeles Telephone: (213) 228-5245 Facsimile: (213) 228-2299 Administrative Agent's Payment Office: -------------------------------------- Bank of America N.A. Mail Code: CA4-706-05-09 1850 Gateway Boulevard, Fifth Floor Concord, California 94520 Attention: Glenis Croucher Assistant Vice President Agency Administrative Services West Telephone: (925) 675-8447 Facsimile: (925) 675-8500 D-1 BANK OF AMERICA, N.A., AS A BANK Domestic and Offshore Lending Office: ------------------------------------- Bank of America N.A. Mail Code: CA4-706-05-09 Agency Administrative Services-West 1850 Gateway Blvd., 5th Floor Concord, CA 94520 Attention: Glenis Croucher Sr. Account Administrator Telephone: (925) 675-8447 Facsimile: (925) 969-2807 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ Bank of America N.A. Mail Code: CA9-706-11-07 555 South Flower Street, 11th Floor Los Angeles, California 90071 Attention: Dianne J. Prust Vice President Credit Products Aerospace/Defense #9848 Telephone: (213) 228-2435 Facsimile: (213) 623-1959 ALLFIRST BANK Domestic and Offshore Lending Office: ------------------------------------- Allfirst Bank 25 S. Charles Street 18/th/ Floor Baltimore, MD 21201 Attention: Jennifer Erickson Vice President Telephone: (410) 244-4721 Facsimile: (410) 244-4239 Email: Jennifer.g.Erickson@allfirst.com -------------------------------- D-2 BANCA DI ROMA--SAN FRANCISCO Domestic and Offshore Lending Office: ------------------------------------- BANCA DI ROMA--San Francisco One Market Steuart Tower, Suite 1000 San Francisco, CA 94105 Attention: Ms. Cecilia Gin Telephone: (415) 977-7321 Facsimile: (415) 357-9869 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ BANCA DI ROMA--San Francisco One Market Steuart Tower, Suite 1000 San Francisco, CA 94105 Attention: Mr. Eric Maubert Assistant Vice President Telephone: (415) 977-7315 Facsimile: (415) 357-9869 D-3 THE BANK OF NEW YORK Domestic and Offshore Lending Office: ------------------------------------- The Bank of New York One Wall Street, 22/nd/ floor New York, NY 10005 Attention: Dawn Hertling Telephone: (212) 635-6742 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ The Bank of New York 10990 Wilshire Blvd. Suite 1125 Los Angeles, CA 90024 Attention: Jonathan Rollins Telephone: (310) 996-8658 Facsimile: (310) 996-8667 Email: jrollins@bankofny.com D-4 BANK ONE, NA Domestic and Offshore Lending Office: ------------------------------------- Bank One, NA 1 Bank One Plaza 10/th/ Floor Chicago, IL 60670 Attention: Sharon Bosch Telephone: (312) 732-7112 Facsimile: (312) 732-4840 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ Bank One, NA 777 South Figueroa 4/th/ Floor Los Angeles, CA 90017 Attention: Anthony Mathews Senior Vice President Telephone: (213) 683-4957 Facsimile: (213) 683-4999 Email: anthony_mathews@em.fcnbd.com D-5 BANQUE NATIONALE DE PARIS Domestic and Offshore Lending Office: ------------------------------------- Banque Nationale de Paris 725 South Figueroa Street Suite 2090 Los Angeles, CA 90017 Attention: Janice Ho Vice President Telephone: (213) 488-9120 Direct: (213) 688-6411 Facsimile: (213) 488-9602 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ Banque Nationale de Paris 725 South Figueroa Street Suite 2090 Los Angeles, CA 90017 Attention: Janice Ho Vice President Telephone: (213) 488-9120 Direct: (213) 688-6411 Facsimile: (213) 488-9602 D-6 BARCLAYS BANK PLC Domestic and Offshore Lending Office: ------------------------------------ Barclays Bank PLC 222 Broadway 11/th/ Floor New York, NY 10038 Attention: Paul Edwards Telephone (212) 412-3730 Facsimile: (212) 412-5306 Email: paul.edwards@barcap.com Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ Barclays Bank PLC 222 Broadway 8/th/ Floor New York, NY 10038 Attention: Richard Smithies Director Telephone (212) 412-6884 Facsimile: (212) 412-7580 Email: richard.smithies@barcap.com D-7 BAYERISCHE LANDESBANK GIROZENTRALE Domestic and Offshore Lending Office: ------------------------------------- Bayerische Landesbank Girozentrale 560 Lexington Avenue New York, NY 10022 Attention: Patricia Sanchez Vice President Telephone: (212) 310-9810 Facsimile (212) 310-9930 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ Bayerische Landesbank Girozentrale 560 Lexington Avenue New York, NY 10022 Attention: James H. Boyle Vice President Telephone: (212) 310-9817 Facsimile: (212) 310-9868 Email: jboyle@baylbny.com CITICORP USA, INC. Domestic and Offshore Lending Office: ------------------------------------ Citicorp, USA, Inc. 399 Park Ave. New York, NY 10043 Attention: Alyssa Kawalek Loan Administrator Telephone: (302) 894-6055 Facsimile: (302) 894-6120 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ Citicorp USA, Inc. 787 West 5th Street 29th Floor Los Angeles, CA 90071 Attention: Walter Larsen Telephone: (213) 239-1501 Facsimile: (213) 623-3592 D-8 CREDIT SUISSE FIRST BOSTON Domestic and Offshore Lending Office: ------------------------------------ Credit Suisse First Boston 11 Madison Avenue New York, NY 10010-3629 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ Credit Suisse First Boston 11 Madison Avenue New York, NY 10010-3629 Primary Contact --------------- David Kratovil Director Telephone: (212) 325-9155 Facsimile: (212) 325-8615 Email: david.kratovil@csfb.com ----------------------- Back-Up Contact --------------- Janko Gogolja Telephone: (212) 325-0699 Facsimile: (212) 325-8319 D-9 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES Domestic and Offshore Lending Office: ------------------------------------ Deutsche Bank AG 31 West 52/nd/ Street New York, NY 10019 Attention: Noble Samuel/Cheryl H. Mandelbaum Telephone: (212) 469-4091 Facsimile: (212) 469-4139 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ Deutsche Bank AG 31 West 52/nd/ Street New York, NY 10019 Attention: Joel Makowsky Vice President Telephone: (212) 469-7896 Facsimile: (212) 469-4604 D-10 THE FUJI BANK, LIMITED Domestic and Offshore Lending Office: ------------------------------------ The Fuji Bank 333 South Hope Street 39/th/ Floor Los Angeles, CA 90071 Attention: Wayne Wong Associate Telephone: (213) 253-4132 Facsimile: (213) 253-4178 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ The Fuji Bank 333 South Hope Street 39/th/ Floor Los Angeles, CA 90071 Attention: Jon Bigelow Vice President Telephone: (213) 253-4144 Facsimile: (213) 253-4178 Email: fbklal4@pacbell.net D-11 MELLON BANK, N.A. Domestic and Offshore Lending Office: ------------------------------------ Mellon Bank, N.A. 3 Mellon Center Room 1203 Pittsburgh, PA 15259 Attention: John Kyle Loan Administrator Telephone: (412) 234-7365 Facsimile: (412) 209-6122 Notices (other than Borrowing notices and Notices of ----------------------------------------------------- Conversion/Continuation): ------------------------ Mellon Bank, N.A. 400 South Hope Street Fifth Floor Los Angeles, CA 90071 Attention: L.C. Ivey Vice President Telephone: (213) 553-9543 Facsimile: (213) 629-0492 Email: ivey.l@mellon.com D-12 THE MITSUBISHI TRUST AND BANKING CORPORATION Domestic and Offshore Lending Office: ------------------------------------ The Mitsubishi Trust and Banking Corporation 520 Madison Avenue New York, NY 10022 Attention: Loan Administration Department Telephone: (212) 891-8262 Facsimile: (212) 755-2349 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ The Mitsubishi Trust and Banking Corporation 520 Madison Avenue New York, NY 10022 Attention: Susan Lau Vice President Telephone: (212) 891-8419 Facsimile: (212) 644-6825 (direct) (212) 755-2349 (central) D-13 MORGAN GUARANTY TRUST COMPANY OF NEW YORK Domestic Lending Office ----------------------- Morgan Guaranty Trust Company of New York 60 Wall Street New York, NY 10260-0060 Execution Copies to: ------------------- Jeannie Mattson Associate Morgan Guaranty Trust Company of New York c/o J.P. Morgan Services, Inc. 500 Stanton Christiana Road 3/OPS2 Newark, DE 19713-2107 Conformed Copies to: ------------------- Robert Bottamedi Vice President Morgan Guaranty Trust Company of New York 60 Wall Street New York, NY 10260-0060 Offshore Lending Office ------------------------ Morgan Guaranty Trust Company of New York Euro-Loan Servicing Department c/o J.P. Morgan Services, Inc. 500 Stanton Christiana Road Newark, DE 19713-2107 Execution Copies to: ------------------- Jeannie Mattson Associate Morgan Guaranty Trust Company of New York c/o J.P. Morgan Services, Inc. 500 Stanton Christiana Road 3/OPS2 Newark, DE 19713-2107 Conformed Copies to: ------------------- Robert Bottamedi Vice President Morgan Guaranty Trust Company of New York D-14 60 Wall Street New York, NY 10260-0060 Notices (other than Borrowing notices and Notices of Conversion/ ---------------------------------------------------------------- Continuation): -------------- JP Morgan Securities Inc 60 Wall Street 5/th/ Floor New York, NY 10260-0060 Attention: Robert Bottamedi Vice President Telephone: (212) 648-1349 Facsimile: (212) 648-5018 SOCIETE GENERALE Domestic and Offshore Lending Office: ------------------------------------- Societe Generale 2001 Ross Avenue #4800 Dallas, TX 75201 Attention: Trina Hoover Loan Specialist Telephone: (214) 979-2742 Facsimile: (214) 754-0171 Notices (other than Borrowing notices and Notices of Conversion/ ---------------------------------------------------------------- Continuation): -------------- Societe Generale 181 West Madison Suite 3400 Chicago, IL 60602 Attention: Editha Paras Telephone: (312) 578-5166 Facsimile: (312) 578-5099 D-15 WESTDEUTSCHE LANDESBANK GIROZENTRALE Domestic and Offshore Lending Office: ------------------------------------- Westdeutsche Landesbank Girozentrale, New York Branch 1211 Avenue of the Americas New York, NY 10036 Attention: Philip Green Vice President Telephone: (212) 852-6113 Facsimile: (212) 302-7946 Email: philip_green@westlb.com Notices (other than Borrowing notices and Notices of Conversion/ ---------------------------------------------------------------- Continuation): -------------- Westdeutsche Landesbank Girozentrale, New York Branch 1211 Avenue of the Americas New York, NY 10036 Attention: Barry Wadler Associate Telephone: (212) 852-6137 Facsimile: (212) 852-6148 Email: barry_wadler@westlb.com D-16 EXHIBIT E EXISTING LIENS PanAmSat $124,000,000.00 Floating Rate Note secured by transponders of Galaxy III-R due 2002 Galaxy Latin America $95,000.00 Capital Lease of AT&T Telephone Switch E-1 EXISTING LIENS EXHIBIT F OPINION OF COUNSEL November 24, 1999 To: The Banks listed on Schedule A hereto; Bank of America, N.A., as Administrative Agent; Citicorp USA, Inc., as Syndication Agent and Deutsche Bank AG, New York Branch, as Documentation Agent Re: Hughes Electronics Corporation Revolving Credit Agreement -------------------------- Ladies and Gentlemen: I am the Assistant General Counsel of Hughes Electronics Corporation, a Delaware corporation (the "Borrower"), in connection with the extension to Borrower of a revolving line of credit extended under and subject to the terms and provisions of the Revolving Credit Agreement (364-day Facility) dated as of November 24, 1999 and made among Hughes Electronics Corporation, the banks parties thereto ("Banks"), Bank of America, N.A., as administrative agent for the Banks (in such capacity "Administrative Agent"), Citicorp USA, Inc., as Syndication Agent and Deutsche Bank AG, New York Branch as Documentation Agent (the "Agreement"). Capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement. This opinion is rendered to you pursuant to Section 5.2(b) of the Credit Agreement. As Assistant General Counsel to Borrower, I have caused to be made such legal and factual examinations and inquiries, including an examination of originals or copies, certified or otherwise identified to my satisfaction as authentic, of such corporate records, agreements, instruments and other documents as I have deemed necessary or appropriate for the purposes of this opinion. I have caused to be obtained such certificates and other assurances (copies of which have been delivered to you) from public officials and officers and other employees of Borrower as I considered necessary or appropriate for the purpose of rendering this opinion. I have assumed the genuineness of all signatures (except that of Borrower), the authenticity of all documents submitted to me as originals, and the conformity with the originals of all documents submitted to me as copies. Subject to the limitations herein set forth, I am opining herein as to the effect on the subject transaction only of United States federal law, the laws of the State of California and the General Corporation Law of the State of Delaware. I am licensed to practice law in the State of F-1 OPINION OF COUNSEL California. I assume no responsibility as to the applicability to the subject transaction or the effect thereon of the laws of any other jurisdiction. Based upon the foregoing and in reliance thereon, and subject to the qualifications, limitations and assumptions set forth herein, I am of the opinion that, as of the date hereof: 1. Borrower is a corporation duly incorporated and validity existing as a corporation in good standing under the laws of the State of Delaware, with full corporate power and authority to own and lease its properties and conduct its business as presently owned and conducted. 2. Borrower is duly qualified to do business as a foreign corporation in good standing in the State of California. 3. Borrower has full corporate power and authority to borrow the sums provided for in the Credit Agreement, to execute and deliver the Credit Agreement and to perform its obligations thereunder. 4. All corporate action required to be taken by Borrower for the authorization, execution and delivery of the Credit Agreement by Borrower and the performance by Borrower of its obligations thereunder has been duly taken. 5. The officer of Borrower executing the Credit Agreement is duly and properly in office and duly authorized to execute the same. 6. The Credit Agreement is a valid and binding agreement of Borrower, subject to the limitations, qualifications, exceptions and assumptions set forth below. 7. To my knowledge, after causing to be conducted such legal and factual examination and inquiries and causing to be conducted such discussions with and obtaining such certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, no consent, permission, authorization, order or license of any United States federal or California governmental authority is necessary in connection with the execution and delivery of the Credit Agreement by Borrower and Borrower's performance of its obligations under the Credit Agreement. 8. There is no provision of the Certificate of Incorporation or the By- laws of Borrower which would be contravened by the execution and delivery of the Credit Agreement by Borrower or by the performance by Borrower of its obligations under the Credit Agreement. 9. Borrower is not an "investment company" as defined in the Investment Company Act of 1940, as amended. 10. To my knowledge, after causing to be conducted such legal and factual examination and inquiries and causing to be conducted such discussions with and obtaining such certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, no consent or approval of any trustee or holder of any material indebtedness of Borrower is necessary in connection with the execution and F-2 OPINION OF COUNSEL delivery of the Credit Agreement by Borrower and Borrower's performance of its obligations under the Credit Agreement. 11. There is no provision of any indenture or material agreement for borrowed money to which Borrower is a party or under which Borrower is obligated, and of which I am aware, after causing to be conducted such legal and factual examinations and inquiries and causing to be conducted such discussion with and obtaining such certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, which would be contravened by the execution and delivery of the Credit Agreement and the Notes by Borrower or by the performance by Borrower of its obligations under the Credit Agreement. 12. To my knowledge, after causing to be conducted such legal and factual examinations and inquiries and causing to be conducted such discussions with and obtaining such certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, there is no judgment, decree or order of any court or governmental agency binding on Borrower which would be contravened by the execution and delivery of the Credit Agreement by Borrower and Borrower's performance of its obligations under the Credit Agreement and the Notes. 13. To my knowledge, after causing to be conducted such legal and factual examinations and inquiries and obtaining certificates or other confirmations from officers and employees of Borrower as I considered appropriate in the circumstances, except as set forth in Attachment 1 hereto, there is no claim, suit, action or proceeding pending or threatened against Borrower before any court or governmental agency which could reasonably be expected to result in a Material Adverse Change. The opinion expressed in paragraph 6 is subject to the following limitations, qualifications, exceptions and assumptions: (a) the enforcement of the Credit Agreement and the Notes may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws or by equitable principles relating to or limiting the rights of creditors generally; (b) the use of the term enforceable shall not imply any opinion as to the availability of equitable remedies; (c) I advise you that a California court may not strictly enforce certain covenants contained in the Credit Agreement or allow acceleration of the maturity of the indebtedness thereunder if it concludes that such enforcement or acceleration would be unreasonable under the then existing circumstances. I do believe, however, that subject to the limitations expressed elsewhere in this opinion, enforcement or acceleration would be available if an Event of Default occurs as a result of a material breach of a material covenant contained in the Credit Agreement; (d) The effect of California court decisions, invoking statutes or principles of equity, which have held that certain covenants and provisions of agreements are unenforceable where (i) the breach of such covenants or provisions imposes restrictions or burdens upon the debtor, F-3 OPINION OF COUNSEL including the acceleration of indebtedness due under debt instruments, and it cannot be demonstrated that the enforcement of such restrictions or burdens is reasonably necessary for the protection of the creditor, or (ii) the creditor's enforcement of such covenants or provisions under the circumstances would violate the creditor's implied covenant of good faith and fair dealing; (e) The unenforceability under certain circumstances, under California or federal law or court decisions, of provisions expressly or by implication waiving broadly or vaguely stated rights, unknown future rights, defenses to obligations or rights granted by law, where such waivers are against public policy or prohibited by law; (f) The unenforceability under certain circumstances of provisions to the effect that rights or remedies are not exclusive, that every right or remedy is cumulative and may be exercised in addition to or with any other right or remedy, that election of a particular remedy or remedies does not preclude recourse to one or more other remedies or that failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any such right or remedy; (g) The effect of Section 1717 of the California Civil Code, which provides that, where a contract permits one party to the contract to recover attorneys' fees, the prevailing party in any action to enforce any provision of the contract shall be entitled to recover its reasonable attorneys' fees; (h) The unenforceability under certain circumstances of provisions indemnifying a party against liability for its own wrongful or negligent acts or where such indemnification is contrary to public policy or prohibited by law; and (i) The enforceability under certain circumstances of provisions imposing penalties, forfeitures, late payment charges or an increase in interest rate upon delinquency in payment or the occurrence of a default. To the extent that the obligations of Borrower may be dependent upon such matters, I assume for purposes of this opinion that each of the Banks is duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization; that each of the Banks is duly qualified to engage in the transaction covered by this opinion; that the Credit Agreement has been duly authorized, executed and delivered by each of the Banks and that the Credit Agreement constitutes the valid and binding obligation of each of the Banks, enforceable in accordance with its terms; and that each of the Banks has the requisite corporate or organizational and legal power and authority to own its properties, to carry on its business as now being conducted and to perform its obligations under the Credit Agreement, including without limitation, to make the loans under the Credit Agreement. I am not expressing any opinion as to the effect of or the compliance by any Bank with any state or federal laws or regulations applicable to the transactions because of the nature of its respective business. This opinion is rendered to the Banks and Administrative Agent as of the date hereof in connection with the above transaction, and may not be relied upon by any person other than the Administrative Agent and the Banks and their permitted assignees, or by them in any other F-4 OPINION OF COUNSEL context, and may not be furnished to, quoted to or relied upon by any other person, firm or corporation for any purpose without my prior written consent; provided that each Bank and its permitted assignees may provide this opinion - -------- (i) to bank examiners and other regulatory authorities should they so request or in connection with their normal examination, (ii) to the independent auditors and attorneys of such Bank, (iii) pursuant to order or legal process of any court or governmental agency, (iv) in connection with any legal action to which the Bank is a party arising out of the transactions contemplated by the Credit Agreement, or (v) in connection with the assignment of or sale of participations in the Loans. Very truly yours, F-5 OPINION OF COUNSEL SCHEDULE A TO OPINION OF COUNSEL Allfirst Bank Banca di Roma--San Francisco The Bank of New York Bank One, NA Banque Nationale de Paris Barclays Bank PLC Bayerische Landesbank Girocentrale Credit Suisse First Boston The Fuji Bank Mellon Bank Mitsubishi Trust Morgan Guaranty Trust Company of New York Societe Generale Westdeutsche Landesbank Girocentrale F-6 OPINION OF COUNSEL ATTACHMENT A TO OPINION OF COUNSEL LITIGATION [None.] F-7 OPINION OF COUNSEL EXHIBIT G [FORM OF REQUEST FOR EXTENSION OF TERMINATION DATE] [LETTERHEAD OF HUGHES ELECTRONICS CORPORATION] _____________________, 200[_] BANKS PARTY TO THE CREDIT AGREEMENT REFERRED TO BELOW Ladies and Gentlemen: In accordance with Section 2.13 of the Revolving Credit Agreement dated as of November 24, 1999 (as amended, the "Credit Agreement"; terms defined therein being used herein as therein defined), among the undersigned, the Banks parties thereto, Bank of America, N.A. as Administrative Agent, Citicorp USA, Inc., as Syndication Agent and Deutsche Bank AG, New York Branch, as Documentation Agent, the undersigned hereby requests that you consent to extension of the Termination Date to [INSERT DATE 364 DAYS AFTER CURRENT TERMINATION DATE], or, if such date is not a Business Day, the next preceding Business Day. Please indicate your consent to such extension of the Termination Date by signing the attached copy of this letter in the space provided below and returning same to the Administrative Agent, if possible by _____________, 20__ but, in any event, not later than ____________, 20___. Very truly yours, HUGHES ELECTRONICS CORPORATION By _________________________ Name: Title: The undersigned Lender, party to the Credit Agreement, consents to the extension of the Termination Date as requested above. [NAME OF BANK] By _________________________ Name: Title: G-1 EXTENSION REQUEST EXHIBIT H [FORM OF COMMITMENT INCREASE LETTER] [LETTERHEAD OF HUGHES ELECTRONICS CORPORATION] __________, 199_ To Bank of America, N.A. as Administrative Agent for the Banks party to the Credit Agreement referred to below Ladies and Gentlemen: In accordance with Section 11.18(a) of the Revolving Credit Agreement (364-Day Facility), dated as of November 24, 1999 (as amended, the "Credit Agreement"; terms defined therein being used herein as therein defined), among the undersigned, the Banks parties thereto, Bank of America, N.A. as Administrative Agent, Citicorp USA, Inc., as Syndication Agent and Deutsche Bank AG, New York Branch as Documentation Agent, the undersigned hereby requests that you, the Administrative Agent and [NAME OF INCREASING BANK] consent to the increase of [$____________] to [NAME OF INCREASING BANK]'S Commitment which shall result in [NAME OF INCREASING BANK]'s net Commitment equaling [$___________]. The undersigned hereby certifies, on behalf of Borrower that (i) representations and warranties contained in Section 6 of the Credit Agreement are true and accurate as though made on and as of the date hereof (except to the extent any representation and warranty is expressly made as of a specific date, in which case such representation and warranty shall be true and correct in all material respects as of such specific date), and (ii) no event has occurred and is continuing or would result from such increase in [INCREASING BANK]'s Commitment which constitutes an Event of Default or an Unmatured Event of Default under the Credit Agreement. H-1 COMMITMENT INCREASE LETTER Please indicate your consent to such increase of the commitment of [NAME OF INCREASING BANK] by signing the attached copy of this letter in the space provided below by __________, 200[_]. Very truly yours, HUGHES ELECTRONICS CORPORATION By________________________ Name: Title: The undersigned parties consent to the increase of [NAME OF INCREASING BANK]'s Commitment as requested above. Accepted this __ day [NAME OF INCREASING BANK] of _________, 200[_] By________________________ Name: Title: Acknowledged and Agreed: Bank of America, N.A. as Administrative Agent By_______________________ Name: Title: H-2 COMMITMENT INCREASE LETTER EXHIBIT I [FORM OF COMPLIANCE CERTIFICATE] COMPLIANCE CERTIFICATE THE UNDERSIGNED HEREBY CERTIFIES THAT: (1) I am the duly elected [Title] of Hughes Electronics Corporation, a Delaware corporation ("Borrower"); (2) I have reviewed the terms of that certain Revolving Credit Agreement (364-Day Facility) dated as of November 24, 1999, as amended, supplemented or otherwise modified to the date hereof (said Revolving Credit Agreement, as so amended, supplemented or otherwise modified, being the "Credit Agreement", the terms defined therein and not otherwise defined in this Certificate (including Attachment No. 1 annexed hereto and made a part hereof) being used in this Certificate as therein defined), by and among Borrower, the financial institutions listed therein as Banks, and Bank of America, N.A., as Administrative Agent, and I have made, or have caused to be made under my supervision, a review in reasonable detail of the transactions and condition of Borrower and its Subsidiaries during the accounting period covered by the attached financial statements; and (3) The examination described in paragraph (2) above did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes an Event of Default or Unmatured Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate[, except as set forth below]. [Set forth [below] [in a separate attachment to this Certificate] are all exceptions to paragraph (3) above listing, in detail, the nature of the condition or event, the period during which it has existed and the action which Borrower or any of its Subsidiaries, as applicable, has taken, is taking, or proposes to take with respect to each such condition or event: - -------------------------------------------------------------------------------] I-1 COMPLIANCE CERTIFICATE The foregoing certifications, together with the computations set forth in Attachment No. 1 annexed hereto and made a part hereof and the financial statements delivered with this Certificate in support hereof, are made and delivered this __________ day of _____________, ____ pursuant to subsection ____7.5(d) of the Credit Agreement. DATED: ____________________ HUGHES ELECTRONICS CORPORATION By:__________________________ Name: Title: I-2 COMPLIANCE CERTIFICATE ATTACHMENT NO. 1 TO COMPLIANCE CERTIFICATE This Attachment No. 1 is attached to and made a part of a Compliance Certificate dated as of ____________, ____ and pertains to the period from ____________, ____ to ____________, ____. Subsection references herein relate to subsections of the Credit Agreement. A. Maximum Leverage Ratio (for the four-fiscal quarter period ending _____________, ____) 1. Outstanding principal amount of all obligations and liabilities for borrowed money: $_____________ 2. portion of obligations with respect to capital leases that are capitalized in excess of $25,000,000: $_____________ 3. Consolidated Funded Indebtedness (1+2): $_____________ 4. Consolidated Net Income: $_____________ 5. Consolidated Interest Charges: $_____________ 6. Provisions for taxes, if any, based on income used or included in determining of 5: $_____________ 7. Total depreciation expense deducted in determining 5: $_____________ 8. Total amortization expense deducted in determining 5: $_____________ 9. Adjustments per clauses (e), (f) and (g) of definition of Consolidated EBITDA: (a) Asia Pacific Mobile Telecommunications $_____________ (b) Hughes Space and Communications _____________ (c) ICO Global Communications _____________ (d) Hughes Network Systems wireless business _____________ (e) PanAmSat launch delays _____________ (f) DirecTV Japan, Ltd. _____________ Total $============= 10. Less DirecTV Japan, Ltd. cash losses per clause (h) of definition of consolidated EBITDA: $_____________ I-3 COMPLIANCE CERTIFICATE 11. Non-cash charges resulting from a change in business strategy regarding DirecTV Japan Ltd. (only for fiscal quarter ending fiscal year ending December 31, 2000 $_____________ 12. Consolidated EBITDA (4+5+6+7+8+9-10+11): $_____________ 13. Leverage Ratio (3):(12): ____:1.00 14. Maximum ratio allowed under subsection 8.5(b): ____:1.00 B. Minimum Shareholders' Equity 1. Base Shareholders' Equity: $7,125,000,000 2. 50% of consolidated net income (as determined in accordance with GAAP) earned in each fiscal quarter ending after December 31, 1998 (with no deduction for a net loss in any such fiscal quarter): $_____________ 3. 50% aggregate increase in Equity by reason of Borrower's issuance of capital stock: $_____________ 4. Minimum Shareholders' Equity (1+2+3): $_____________ 5. Shareholders' Equity $_____________ I-4 COMPLIANCE CERTIFICATE EXHIBIT J [FORM OF NOTICE OF ASSIGNMENT AND ACCEPTANCE] [Date] To: Bank of America, N.A., as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Revolving Credit Agreement (364-Day Facility) dated as of November 24, 1999 between Hughes Electronics Corporation, a Delaware corporation ("Borrower"), Lenders from time to time party thereto, and Bank of -------- America, N.A., as Administrative Agent (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined). --------- 1. We hereby give you notice of, and request your consent to, the assignment by [_____________________________] (the "Assignor") to [_____________________] -------- (the "Assignee") of ___________% of the right, title and interest of the -------- Assignor in and to the Agreement, including the right, title and interest of the Assignor in and to the Commitment of the Assignor and all outstanding Loans made by the Assignor. Before giving effect to such assignment: (a) the aggregate amount of the Assignor's Commitment is $_________; and (b) the aggregate principal amount of its outstanding Loans is $________. 2. The Assignee hereby represents and warrants that it has complied with the requirements of Section 11.11 of the Agreement in connection with this ------------- assignment and acknowledges and agrees that: (a) other than the representation and warranty that it is the legal and beneficial owner of the Normal Percentage being assigned thereby free and clear of any adverse claim, the Assignor has made no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Agreement or the execution, legality, validity, enforceability, genuineness or sufficiency of the Agreement; (b) the Assignor has made no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance by Borrower of its obligations under the Agreement; (c) it has received a copy of the Agreement, together with copies of the most recent financial statements delivered pursuant to Section 7.5 thereof and such other documents and information as it has ----------- deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (d) it will, independently and without reliance upon Administrative Agent or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement; (e) it appoints and authorizes Administrative Agent to take such action and to exercise such powers under the Agreement as are delegated to Administrative Agent by the Agreement; and (f) it will perform in accordance with their terms all of the obligations which by the terms of the Agreement are required to be performed by it as a Bank. J-1 FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT 3. The Assignee agrees that, upon receiving your consent to such assignment and from and after [_______, ______], the Assignee will be bound by the terms of the Agreement, with respect to the interest in the Agreement assigned to it as specified above, as fully and to the same extent as if the Assignee were a Bank originally holding such interest in the Agreement. J-2 FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT 4. The following administrative details apply to the Assignee: (a) Offshore Lending Office: Assignee name:_____________________________ Address:___________________________________ ___________________________________________ Attention:_________________________________ Telephone: (___)__________________________ Telecopier: (___)__________________________ (b) Domestic Lending Office: Assignee name:_____________________________ Address:___________________________________ ___________________________________________ Attention:_________________________________ Telephone: (___)__________________________ Telecopier: (___)__________________________ (c) Notice Address: Assignee name:_____________________________ Address:___________________________________ ___________________________________________ Attention:_________________________________ Telephone: (___)__________________________ Telecopier: (___)__________________________ (d) Payment Instructions: Account No.: Account No.________________________________ Attention:_________________________________ Reference:_________________________________ J-3 FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice of Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned. Very truly yours, [ASSIGNOR] By:_____________________________________ Name: Title: [ASSIGNEE] By:_____________________________________ Name: Title: We hereby consent to the foregoing assignment. HUGHES ELECTRONICS CORPORATION By:_______________________ Name: Title: BANK OF AMERICA, N.A., as Administrative Agent By:_______________________ Name: Title: J-4 FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT EX-10.8 8 1ST AMEND TO REVOLVING CREDIT AGREE 364 DAY FACIL EXHIBIT 10.8 HUGHES ELECTRONICS CORPORATION FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (364 DAY FACILITY) This FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (364-DAY FACILITY) (this "Amendment") is dated as of December 31, 1999 and entered into by and among HUGHES ELECTRONICS CORPORATION, a Delaware corporation (the "Borrower"), the financial institutions listed on the signature pages hereof (the "Banks"), BANK OF AMERICA, N.A., as the administrative agent for the Banks (in such capacity the "Administrative Agent"), CITICORP USA, INC. as the syndication agent (in such capacity the "Syndication Agent") and DEUTSCHE BANK AG, NEW YORK BRANCH as documentation agent (the "Documentation Agent") and is made with reference to that certain Revolving Credit Agreement (364-Day Facility) dated as of November 24, 1999 (as so amended, the "Credit Agreement"), by and among the Borrower, the lending institutions identified therein, the Administrative Agent, the Syndication Agent and the Documentation Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Borrower and Banks desire to amend the Credit Agreement to (i) revise the definition of Consolidated EBITDA; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 Amendments to Section 1: Definitions ------------------------------------- Subsection 1.1 of the Credit Agreement is hereby amended by deleting the definition of Consolidated EBITDA in its entirety, and by replacing it with the following: "Consolidated EBITDA" means, for any period, for Borrower and its Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Consolidated Net Income, (b) Consolidated Interest Charges, (c) the amount of taxes, based on or measured by income, used or included in the determination of such Consolidated Net Income, (d) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income, (e) for each fiscal quarter in the fiscal year ending December 31, 1999, (i) the amount of charges taken in connection with the cancellation of contract with Asia Pacific Mobile Telecommunications, up to an aggregate amount of $92,000,000 for all such fiscal quarters, and (ii) the amount of charges taken in connection with development costs and schedule delays at Hughes Space and Communication up to an aggregate amount of $125,000,000 for all such fiscal quarters, (f) for the last fiscal quarter of the fiscal year ending December 31, 1999, (i) if a non-cash charge is taken in connection with the write-off of equity investment in ICO Global Communications, the amount of such non-cash charge up to an aggregate amount of $62,000,000, (ii) if a non-cash charge is taken in connection with the write-off of equity investment in the Hughes Network Systems wireless business, the amount of such non-cash charge up to an aggregate amount of $272,000,000, and (iii) if a change in business strategy related to DirecTV Japan, Ltd. results in cash and/or non-cash charges, the amount of such cash and/or non-cash charges up to an aggregate amount of $250,000,000, and (g) for each fiscal quarter in the fiscal year ending December 31, 2000, the amount of non-cash charges taken in connection with ICO Global Communications and PanAmSat launch delays, up to an aggregate amount for all such fiscal quarters of (x) $150,000,000 minus (y) the amount of the charge, if any, added pursuant to clauses (f)(i) above; minus (h) for each fiscal quarter ----- in the fiscal year ending December 31, 2000, the amount of cash losses (whether or not accounted for as charges under GAAP) in connection with DirecTV Japan, Ltd., but only if such cash losses were reflected in the charges, if any, added pursuant to clause (f)(iii); plus (i) for each fiscal quarter in the fiscal year ---- ending December 31, 2000, if any change in business strategy regarding DirecTV Japan, Ltd. results in a non-cash charge, the amount of such non-cash charge up to an aggregate amount of $150,000,000 minus the amount of non-cash charges, if any, added pursuant to clause (f)(iii) above. 2. CONDITIONS TO EFFECTIVENESS Section 1 of this Amendment shall become effective only upon the satisfaction of all of the following conditions precedent (the date of satisfaction of such conditions being referred to herein as the "Amendment Effective Date"): (A) On or before the Amendment Effective Date, Borrower shall deliver to the Banks (or to the Administrative Agent for the Banks with sufficient originally executed copies, where appropriate, for each Bank and its counsel) the following, each, unless otherwise noted, dated the Amendment Effective Date: (1) A certificate, signed by a vice president or assistant treasurer of Borrower dated the Amendment Effective Date certifying: (i) that the representations and warranties of Borrower contained in the Credit Agreement are true and correct in all material respects; and (ii) that, after giving effect to this Amendment, no event has occurred and is continuing or would result from the making of a Loan which constitutes or would constitute an Event of Default or an Unmatured Event of Default; and (2) Copies of this Amendment executed by Borrower, the Majority Banks and the Administrative Agent. (B) All fees and other amounts due to the Administrative Agent, Syndication Agent, Documentation Agent, Arranger and any Bank through the Amendment Effective Date from Borrower shall have been received by such person. 3. BORROWER'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Borrower represents and warrants to each Bank that the following statements are true, correct and complete: 2 (A) Corporate Power and Authority. Borrower has all requisite ----------------------------- corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "Amended Agreement"). (B) Authorization of Agreements. The execution and delivery of this --------------------------- Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Borrower. (C) No Contravention. There is no charter, by-law, or capital stock ---------------- provision of Borrower and no provision of any indenture or material agreement, written or oral, to which Borrower is a party or under which Borrower is obligated, nor is there any statute, rule or regulation, or any judgment, decree or order of any court or agency binding on Borrower which would be contravened by the execution, delivery and performance of any provision, condition, covenant or other term of this Amendment or the Amended Agreement. (D) Binding Obligation. This Amendment and the Amended Agreement are ------------------ the legal, valid and binding obligation of Borrower, enforceable against it in accordance with their terms, and any instrument or agreement required hereunder or by the Amended Agreement, when executed and delivered, will be similarly valid, binding and enforceable. (E) Incorporation of Representations and Warranties From Credit ----------------------------------------------------------- Agreement. The representations and warranties contained in Section 6 of the - --------- Credit Agreement are and will be true, correct and complete in all material respects on and as of the Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. (F) Absence of Default. After giving effect to this Amendment, no ------------------ event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Unmatured Event of Default. 4. MISCELLANEOUS (A) Reference to and Effect on the Credit Agreement and the Other Loan Documents. (i) On and after the Amendment Effective Date, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other documents entered pursuant to the Credit Agreement to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. 3 (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other documents entered pursuant to the Credit Agreement shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. (B) Fees and Expenses. Borrower acknowledges that all costs, fees ----------------- and expenses as described in subsection 11.14 of the Credit Agreement incurred by the Arranger, the Administrative Agent and their counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of Borrower. (C) Headings. Section and subsection headings in this Amendment are -------- included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. (D) California Law. The interpretation, enforcement and effect of -------------- this Amendment shall be governed and controlled in all respects by and construed according to the substantive laws of the State of California. (E) Counterparts; Effectiveness. This Amendment may be executed in --------------------------- any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment (other than the provisions of Section 1 hereof, the effectiveness of which is governed by Section 2 hereof) shall become effective upon the execution of a counterpart hereof by Borrower and Majority Banks and receipt by Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. HUGHES ELECTRONICS CORPORATION By: _______________________________ Name: Title: S-1 BANK OF AMERICA, N.A., as Administrative Agent By: ______________________________ Name: Title: S-2 CITICORP USA, INC., as Syndication Agent and as a Bank By: ________________________________ Name: Title: S-3 DEUTSCHE BANK AG, NEW YORK BRANCH, as Documentation Agent By: ________________________________ Name: Title: S-4 ALLFIRST BANK By:___________________________________ Name: Title: S-5 BANCA DI ROMA - SAN FRANCISCO By:________________________________________ Name: Title: S-6 BANK OF AMERICA, N.A., as a Bank By:________________________________________ Name: Title: S-7 THE BANK OF NEW YORK By:________________________________________ Name: Title: S-8 BANK ONE, NA By:________________________________________ Name: Title: S-9 BARCLAYS BANK PLC By:________________________________________ Name: Title: S-10 BANQUE NATIONALE DE PARIS By:________________________________________ Name: Title: By:________________________________________ Name: Title: S-11 BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH By:________________________________________ Name: Title: S-12 CREDIT SUISSE FIRST BOSTON By:________________________________________ Name: Title: By:________________________________________ Name: Title: S-13 DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR CAYMAN ISLAND BRANCHES, as a Bank By:________________________________________ Name: Title: By:________________________________________ Name: Title: S-14 THE FUJI BANK, LIMITED By:________________________________________ Name: Title: S-15 MELLON BANK, N.A. By:________________________________________ Name: Title: S-16 THE MITSUBISHI TRUST AND BANKING CORPORATION, NEW YORK BRANCH By:________________________________________ Name: Title: S-17 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By:________________________________________ Name: Title: S-18 SOCIETE GENERALE By:________________________________________ Name: Title: S-19 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH By:________________________________________ Name: Title: By:________________________________________ Name: Title: S-20 EX-10.9 9 AMENDED & RESTATED REV. CREDIT MULTI YEAR FACILITY EXHIBIT 10.9 ANNEX A ================================================================================ - -------------------------------------------------------------------------------- Amended and Restated Revolving Credit Agreement (Multi-Year Facility) Dated as of November 24, 1999 among Hughes Electronics Corporation The Banks named herein and Bank Of America, N.A. as Administrative Agent Morgan Guaranty Trust Company of New York as Syndication Agent Citicorp USA, Inc. and The Chase Manhattan Bank as Documentation Agents Arranged by Banc of America Securities LLC [LOGO] - -------------------------------------------------------------------------------- ================================================================================ TABLE OF CONTENTS
Page SECTION 1 DEFINITIONS 1.1 Definitions.............................................................................. 1 SECTION 2 THE CREDIT 2.1 The Commitments.......................................................................... 11 2.2 The Loans................................................................................ 12 2.3 Requests for Base Rate and Eurodollar Loans.............................................. 12 2.4 Requests for Bid Rate Loans.............................................................. 12 2.5 Interest and Principal on Base Rate Loans................................................ 13 2.6 Interest and Principal on Eurodollar Loans............................................... 13 2.7 Interest and Principal on Bid Rate Loans................................................. 14 2.8 Loan Accounts............................................................................ 14 2.9 Master Bid Rate Notes.................................................................... 14 2.10 Conversion of Loans Between Eurodollar Loans and Base Rate Loans and Conversion of Interest Periods of Eurodollar Loans....................................... 15 2.11 Disbursements and Payments............................................................... 15 2.12 Facility Fee............................................................................. 16 SECTION 3 PAYMENT OF COSTS AND REDUCTION OF THE COMMITMENT 3.1 Indemnification Upon Failure to Pay Eurodollar Loan or Bid Rate Loan..................... 17 3.2 Increased Costs.......................................................................... 17 3.3 Taxes.................................................................................... 18 3.4 Prepayment............................................................................... 19 3.5 Pro Rata Reduction of Commitments by Borrower............................................ 19 3.6 Reduction of One Bank's Commitment by Borrower........................................... 19 3.7 Notice of Reductions..................................................................... 20 3.8 Designation of Replacement Bank.......................................................... 20 3.9 Effect of Reduction of Commitment........................................................ 20 3.10 Accrued Fees............................................................................. 20 3.11 Survival................................................................................. 21 SECTION 4 CHANGE IN CIRCUMSTANCES AFFECTING LOANS
-i- TABLE OF CONTENTS (continued)
Page 4.1 Inability to Determine Eurodollar Rate................................................... 21 4.2 Illegality............................................................................... 21 SECTION 5 CONDITIONS PRECEDENT 5.1 Conditions Precedent to Signing Date..................................................... 22 5.2 Conditions Precedent to Effective Date................................................... 22 5.3 Conditions Precedent to Loans............................................................ 23 SECTION 6 REPRESENTATIONS AND WARRANTIES 6.1 Authority of Borrower.................................................................... 23 6.2 Binding Obligations...................................................................... 24 6.3 Incorporation of Restricted Subsidiaries................................................. 24 6.4 No Contravention......................................................................... 24 6.5 Notices.................................................................................. 24 6.6 Financial Statements..................................................................... 24 6.7 ERISA.................................................................................... 24 6.8 Regulation U............................................................................. 25 6.9 Taxes.................................................................................... 25 6.10 Insurance................................................................................ 25 6.11 Liens.................................................................................... 25 SECTION 7 AFFIRMATIVE COVENANTS OF BORROWER 7.1 Use of Proceeds of Loans................................................................. 25 7.2 Management of Business................................................................... 25 7.3 Notice of Certain Events................................................................. 26 7.4 Records.................................................................................. 26 7.5 Information Furnished.................................................................... 26 7.6 Execution of Other Documents............................................................. 27 7.7 ERISA.................................................................................... 27 7.8 Administrative Agent's Fees.............................................................. 27 7.9 Compliance with Law...................................................................... 28 SECTION 8 NEGATIVE COVENANTS OF BORROWER
-ii- TABLE OF CONTENTS (continued)
Page 8.1 Liens.................................................................................... 28 8.2 Mergers, Liquidations and Sales of Assets................................................ 29 8.3 Defaults................................................................................. 30 8.4 Compliance with Regulations.............................................................. 30 8.5 Financial Covenants...................................................................... 30 SECTION 9 EVENTS OF DEFAULT 9.1 Events of Default........................................................................ 31 9.2 Recovery of Amounts Due.................................................................. 34 9.3 Rights Cumulative........................................................................ 35 SECTION 10 THE BANKS 10.1 Administration of Loan................................................................... 35 10.2 Representations By Banks................................................................. 35 SECTION 11 MISCELLANEOUS PROVISIONS 11.1 Amendments and Waivers................................................................... 35 11.2 Notices.................................................................................. 35 11.3 Waiver................................................................................... 36 11.4 California Law........................................................................... 36 11.5 Headings................................................................................. 36 11.6 Accounting Terms......................................................................... 36 11.7 Counterparts............................................................................. 37 11.8 Written Disclosure....................................................................... 37 11.9 Singular; Plural......................................................................... 37 11.10 Illegality............................................................................... 37 11.11 Assignments.............................................................................. 37 11.12 Obligations Several...................................................................... 38 11.13 Participations........................................................................... 38 11.14 Fees and Expenses........................................................................ 39 11.15 Indemnity................................................................................ 39 11.16 Confidentiality.......................................................................... 40 11.17 Termination of Existing Agreements....................................................... 42 11.18 Waiver of Right to Trial by Jury......................................................... 42
-iii- AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (MULTI-YEAR FACILITY) THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (MULTI-YEAR FACILITY) ("Agreement") is entered into as of November 24, 1999 (the "Signing Date") among HUGHES ELECTRONICS CORPORATION, a corporation organized and existing under the laws of Delaware ("Borrower"), the banks named herein (collectively, together with any other lenders that become parties hereto pursuant to Section 3.8 or 11.11, the "Banks" and individually a "Bank"), Bank of America, N.A., as administrative agent for the Banks (in such capacity "Administrative Agent"), Morgan Guaranty Trust Company of New York, as Syndication Agent (in such capacity "Syndication Agent"), and Citicorp USA, Inc. and The Chase Manhattan Bank as Documentation Agents (in such capacity "Documentation Agents"). R E C I T A L S --------------- WHEREAS, pursuant to the Revolving Credit Agreement (Multi-Year Facility) dated as of December 5, 1997, among Borrower, the financial institutions listed on the signature pages thereof, Syndication Agent, Documentation Agents and Administrative Agent (the "Original Credit Agreement"), Banks agreed to extend certain credit facilities to Borrower; WHEREAS, the Original Credit Agreement has been amended pursuant to that certain First Amendment to Revolving Credit Agreement (Multi-Year Facility) dated as of December 15, 1998 among Borrower, the lending institutions identified therein, the Administrative Agent, the Syndication Agent and the Documentation Agents (the "First Amendment"; the Original Agreement, as amended by the First Amendment, the "Current Agreement"); WHEREAS, Borrower, the lending institutions that executed the signature pages thereof (which lenders constituted the Majority Banks), Syndication Agent, Documentation Agents and Administrative Agent entered into that certain Amendment Agreement Regarding Revolving Credit Agreement (Multi-Year Facility) dated as of November 24, 1999 (the "Amendment Agreement"), pursuant to which the Current Agreement has been amended and restated in its entirety as set forth herein; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Company, Banks, Documentation Agent, Syndication Agent and Administrative Agent agree as follows: SECTION 1 DEFINITIONS 1.1 Definitions. ----------- "Aggregate Long-Term and Short-Term Commitments" means the Total Commitment plus the "Total Commitment", as defined in the Short-Term Credit Agreement. "Applicable Amount" means, for the facility fee and Eurodollar Loans, the amount (expressed in basis points per annum) set forth in the chart below opposite the Applicable Level -1- then in effect:
================================================================================================ Applicable Amount Applicable Debt Ratings (in basis points per annum) --------------------------------------------------- Level Eurodollar Rate Facility Fee + - ------------------------------------------------------------------------------------------------ 1 greater than or 27.5 10.0 equal to A-/A3 - ------------------------------------------------------------------------------------------------ 2 BBB+/Baa1 37.5 12.5 - ------------------------------------------------------------------------------------------------ 3 BBB/Baa2 60.0 15.0 - ------------------------------------------------------------------------------------------------ 4 BBB-/Baa3 80.0 20.0 - ------------------------------------------------------------------------------------------------ 5 BB+/Ba1 100.0 25.0 - ------------------------------------------------------------------------------------------------ 6 less than or 145.0 30.0 equal to BB/Ba2 ================================================================================================
Provided that so long as the actual Applicable Level as set forth in the -------- above table is Level 1, Level 2, Level 3 or Level 4, the Applicable Level for purposes of calculating the Applicable Amount shall be deemed to be Level 4 until such time as the principal amount of the Loans and the principal amount of the "Loans", as defined in the Short-Term Credit Agreement, have been reduced to zero, at which time the Applicable Level shall be determined as set forth in the above table; provided further that so long as the actual Applicable Level as set -------- ------- forth in the above table is Level 5 or Level 6, the Applicable Level shall be determined as set forth in the above table. "Applicable Level" means the level set forth opposite the Debt Ratings in the definition of Applicable Amount then in effect, subject to the provisos to such definition. Any change in the Applicable Level shall become effective upon any public announcement of any change in any Debt Rating that requires a change in the Level in accordance with the above chart. "Approved Bank Affiliate" means a Person that is a subsidiary of a Bank or of a Person of which a Bank is a subsidiary, and which is either engaged primarily in the business of commercial banking or, if not so engaged, which has been approved by the Borrower and Administrative Agent (provided that Borrower's -------- consent shall not be unreasonably withheld). "Arranger" means BAS. "Authorized Designee" means the chief executive officer, the vice chairman, the chief financial officer, treasurer or the assistant treasurer of Borrower, or any other officer of Borrower -2- specified as being an Authorized Designee in the certificate delivered pursuant to Section 5.2(c). "Availability Period" means the period commencing on the Effective Date and ending on the Termination Date. "Bank of America" means Bank of America, N.A. in its capacity as a Bank. "BAS" means Banc of America Securities LLC. "Base Rate" means the higher of: (a) the rate of interest publicly announced from time to time by Bank of America in San Francisco, California, as its "reference rate," which is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate; and (b) one- half percent per annum above the Federal Funds Rate. Any change in the reference rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Loan" means a Loan bearing interest based on the Base Rate calculated pursuant to Section 2.5. "Bid Rate" means an interest rate offered by a Bank in its sole discretion and in response to the Borrower's Loan Request for a Bid Rate Loan pursuant to Section 2.4, which interest rate shall include all applicable reserve and other adjustments when being advised by such Bank to Administrative Agent. "Bid Rate Loan" means a Loan bearing interest at a Bid Rate. "Borrowing Date" means a date on which funds are advanced to Borrower by one or more Banks pursuant to a Loan Request. "Business Day" means a day other than a Saturday or Sunday on which banks are open for business in both San Francisco, California and New York, New York. "Commercial Paper" means short term commercial paper (with a maturity date not in excess of 270 days from the date of its issuance) issued by Borrower (a) pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended or modified from time to time, or (b) pursuant to the exemption from registration contained in Section 3(a)(3) of the Securities Act of 1933, as amended or modified from time to time, with respect to which a recognized rating agency has taken this Agreement into account in the rating of such short term commercial paper. "Commitment" of each Bank means the dollar amount set forth opposite such Bank's name on Schedule 1 hereto, as such amount may be reduced or changed pursuant to Sections 3.5 and 3.6. "Compliance Certificate" means a certificate in the form of Exhibit G, --------- properly -3- completed and signed by Borrower's Treasurer or an Assistant Treasurer. "Consolidated Adjusted Net Worth" means, as of the date of determination thereof, the consolidated stockholders equity of Borrower and its Subsidiaries in accordance with GAAP adjusted by adding back the amount by which such consolidated stockholders equity has been reduced (or by subtracting the amount by which stockholders equity has been increased) on account of (a) changes subsequent to December 31, 1992 in the long term liability of Borrower and its Subsidiaries for post-retirement benefits other than pensions and (b) specified material non-cash adjustments resulting from the adoptions of future pronouncements of the Financial Accounting Standards Board. "Consolidated EBITDA" means, for any period, for Borrower and its Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Consolidated Net Income, (b) Consolidated Interest Charges, (c) the amount of taxes, based on or measured by income, used or included in the determination of such Consolidated Net Income, (d) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income, (e) for each fiscal quarter in the fiscal year ending December 31, 1999, (i) the amount of charges taken in connection with the cancellation of contract with Asia Pacific Mobile Telecommunications, up to an aggregate amount of $92,000,000 for all such fiscal quarters, and (ii) the amount of charges taken in connection with development costs and schedule delays at Hughes Space and Communication up to an aggregate amount of $125,000,000 for all such fiscal quarters, (f) for the last fiscal quarter of the fiscal year ending December 31, 1999, (i) if a non-cash charge is taken in connection with the write-off of equity investment in ICO Global Communications, the amount of such non-cash charge up to an aggregate amount of $62,000,000 and (ii) if a change in business strategy related to DirecTV Japan, Ltd. results in cash and/or non-cash charges, the amount of such cash and/or non-cash charges up to an aggregate amount of $250,000,000, and (g) for each fiscal quarter in the fiscal year ending December 31, 2000, the amount of non-cash charges taken in connection with ICO Global Communications, the Hughes Network Systems wireless business and PanAmSat launch delays, up to an aggregate amount for all such fiscal quarters of (x) $500,000,000 minus (y) the amount of the charge, if any, added pursuant to clause (f)(i) above; minus (h) ----- for each fiscal quarter in the fiscal year ending December 31, 2000, the amount of cash losses (whether or not accounted for as charges under GAAP) in connection with DirecTV Japan, Ltd., but only if such cash losses were reflected in the charges, if any, added pursuant to clause (f)(ii); plus (i) for each ---- fiscal quarter in the fiscal year ending December 31, 2000, if any change in business strategy regarding DirecTV Japan, Ltd. results in a non-cash charge, the amount of such non-cash charge up to an aggregate amount of $150,000,000 minus the amount of non-cash charges, if any, added pursuant to clause (f)(ii) above. "Consolidated Funded Indebtedness" means, as of any date of determination, for Borrower and its Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal amount of all obligations and liabilities, whether current or long-term, for borrowed money (including Loans hereunder), and (b) that portion of obligations with respect to capital leases that are capitalized in the consolidated balance sheet of Borrower and its Subsidiaries in excess of an aggregate amount of $25,000,000. "Consolidated Interest Charges" means, for any period, for Borrower and its Subsidiaries -4- on a consolidated basis, the sum of (a) all interest, premium payments, fees, charges and related expenses payable by Borrower and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets and imputed interest associated with the assumption of liabilities relating to programming contracts under purchase accounting in accordance with GAAP, in each case to the extent treated as interest in accordance with GAAP, and (b) the portion of rent payable by Borrower and its Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP. "Consolidated Net Income" means, for any period, for Borrower and its Subsidiaries on a consolidated basis, the net income of Borrower and its Subsidiaries from continuing operations after extraordinary items (excluding gains or losses form Dispositions of assets) for that period. "Consolidated Tangible Net Worth" means, at any date of determination, Consolidated Adjusted Net Worth less the consolidated intangible assets of ---- Borrower and its Subsidiaries, determined in accordance with GAAP. "Debt Rating" means, as of any date of determination, the rating as determined by either Standard & Poor's Ratings Group or Moody's Investors Service, Inc. (collectively, the "Debt Ratings"); of (a) the Borrower's senior unsecured long-term debt or (b) if the foregoing debt is not outstanding, then the rating of this bank credit facility or the implied rating of senior unsecured and non-credit enhanced debt securities, provided that if both ratings ------------- in this clause (b) have been issued then both shall apply; or (c) if neither (a) nor (b) apply, then the rating of long-term debt issued by equipment trust guaranteed by Borrower; provided that if a Debt Rating is issued by both of such ------------- rating agencies, then the more credit worthy of such credit ratings shall apply unless the split in credit ratings is more than one level, in which case the level one level higher than the lower rating shall apply. Initially, the Debt Ratings shall be determined from the certificate delivered pursuant to Section 5.2(d). Thereafter the credit ratings shall be determined from the most recent public announcement of any changes in such credit ratings. "Effective Date" means the date the conditions set forth in Section 5.2 are satisfied or waived by the Banks. "Eligible Assignee" means a Person which can lawfully fulfill all of the obligations of a Bank hereunder and is (a) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; or (c) any Person engaged primarily in the business of commercial banking and that is a subsidiary of a Bank or of a Person of which a Bank is a subsidiary. "ERISA" means the Employee Retirement Income Security Act of 1974, as in effect from time to time. -5- "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with Borrower or any Subsidiary of Borrower within the meaning of Section 414(b), 414(c) or 414(m) of Internal Revenue Code of 1986, as amended. "Eurodollar Banking Day" means a day on which banks are open for business in San Francisco, California, New York, New York and the applicable offshore dollar interbank market and dealing in U. S. Dollar deposits. "Eurodollar Loan" means a Loan at the rate of interest calculated pursuant to Section 2.6. "Eurodollar Rate" means for each Interest Period of a Eurodollar Loan the arithmetic mean of the rates of interest rounded to the nearest 1/100 of one percent as notified to the Administrative Agent by the Reference Banks at which U.S. Dollar deposits for such Interest Period and in an amount comparable to the Principal Amount of such Eurodollar Loan would be offered by such Reference Banks to major banks in the London offshore dollar interbank market upon request of such banks at approximately 11:00 a.m. London time two Eurodollar Banking Days prior to the first day of such Interest Period. "Event of Default" means any event specified in Section 9.1. "Existing Agreements" means (a) the Revolving Credit Agreement dated as of January 4, 1995, as amended, among Borrower, the banks party thereto and Bank of America National Trust and Savings Association, as agent for such banks; (b) the Revolving Promissory Note dated June 16, 1997 in favor of Bank of America National Trust and Savings Association; (c) the Note dated June 30, 1997 in favor of Morgan Guaranty Trust Company of New York, and (d) the Promissory Note dated July 1, 1997 in favor of Citicorp USA, Inc. "Federal Funds Rate" means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m. Quotation") for such day under the caption "Federal Funds Effective Rate". If on any relevant day the appropriate rate for such day is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by Administrative Agent. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System, or any successor thereto. "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting -6- Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statements by such other entity as may be in general use by significant segments of the U.S. accounting profession, which are applicable to the circumstances as of the date of determination. "Granting Bank" has the meaning specified in Section 11.11(c). "Interest Payment Date" means, with respect to each Bid Rate Loan and each Eurodollar Loan, the last day of each Interest Period; provided, however, that -------- ------- if any Interest Period (a) in the case of a Bid Rate Loan exceeds 90 days and (b) in the case of a Eurodollar Loan exceeds three months, "Interest Payment Date" shall mean the 90th day and the last day of the third month of such Interest Period, respectively, as well as the last day of the relevant Interest Period; and, with respect to each Base Rate Loan, means the 10th day of each January, April, July, and October and the Termination Date. If any day specified herein is not a Business Day or, in the case of a Eurodollar Loan, a Eurodollar Banking Day, then the relevant Interest Payment Date shall be the next succeeding Business Day or Eurodollar Banking Day, as applicable, except as otherwise provided in the definition of Interest Period. "Interest Period" means: (a) with respect to each Bid Rate Loan, a period of 7 to 180 days as selected by Borrower by a Loan Request delivered to Administrative Agent in accordance with Section 2.4, and (b) with respect to each Eurodollar Loan, a period of one, two, three or six months as selected by Borrower by a Loan Request delivered to Administrative Agent in accordance with Section 2.3, subject to the following: (i) If the term of an Interest Period is not designated, a period of 30 days shall be deemed selected for the relevant Bid Rate Loan and a period of one month shall be deemed selected for the relevant Eurodollar Loan; (ii) The first Interest Period for each Loan shall commence on the date such Loan is disbursed and each succeeding Interest Period for such Loan shall commence on the last day of the preceding Interest Period for such Loan; (iii) In the case of a Bid Rate Loan, if the last day of an Interest Period falls on a day that is not a Business Day, the Interest Period involved shall be extended to the next succeeding Business Day, and the next succeeding Interest Period shall be measured from the last day of the Interest Period as so adjusted; (iv) In the case of a Eurodollar Loan, if the last day of an Interest Period falls on a day that is not a Eurodollar Banking Day, the Interest Period involved shall be extended to the next following Eurodollar Banking Day unless as a result thereof it would fall into the next calendar month, in which case the end of the Eurodollar Interest Period shall be the preceding Eurodollar Banking Day, and in either case the next succeeding Eurodollar Interest Period shall be measured from the last day of the Interest Period as so adjusted; -7- (v) If an Interest Period for a Eurodollar Loan commences on the last Eurodollar Banking Day of a calendar month, it shall end on the last Eurodollar Banking Day of a calendar month; and (vi) No Interest Period shall end on a day later than the Termination Date. "Investment Grade" means a Debt Rating by S&P of BBB- or better and Debt Rating by Moody's of Baa3 or better. "Lending Office" means with respect to any Bank as the context shall require, the branch office of such Bank designated as the Lending Office of such Bank in Exhibit D attached hereto and incorporated herein by reference; or any other branch office or affiliate of such Bank hereafter selected and notified to Borrower and Administrative Agent from time to time by such Bank; provided that any Bank may from time to time by notice to Borrower and Administrative Agent designate separate Lending Offices for its Bid Rate Loans, its Eurodollar Loans and/or its Base Rate Loans, in which case any reference to the Lending Office of such Bank shall be deemed to refer to any or all of such offices, branches or affiliates as the context may require. "Letter Agreement" means that letter agreement among Arranger, Administrative Agent and Borrower dated October 23, 1997 specifying Arranger's and Administrative Agent's compensation for services hereunder as such letter agreement may from time to time be amended, restated, reissued or otherwise modified. "Leverage Ratio" means, as of the end of any fiscal quarter, for the Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA for the period of the four fiscal quarters ended on such date. "Lien" means any trust deed, mortgage, pledge, hypothecation, assignment, security interest, lien, charge or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the lien of an attachment, judgment or execution, or any conditional sale or other title retention agreement, any capitalized lease, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction, but excluding financing statements filed to give notice of leases in the ordinary course of business). "Loan" or "Loans" means the loans described in Section 2, any of which may be at any time Base Rate Loans, Eurodollar Loans or Bid Rate Loans. "Loan Request" means a notice given by Borrower pursuant to Section 2.3 or 2.4. "Majority Banks" means those Banks whose Commitments constitute at least 60% of the Total Commitment as such Total Commitment may be adjusted from time to time pursuant to the terms of this Agreement, or if the Commitments have terminated, those Banks holding at least 60% of the outstanding Loans (other than Bid Rate Loans). "Master Bid Rate Note" means a promissory note of Borrower payable to order of a Bank -8- in substantially the form of Exhibit B hereto in favor of such Bank evidencing the indebtedness of the Borrower to such Bank resulting from a Bid Rate Loan made by such Bank. "Material Change" means any adverse change which could reasonably be expected to materially impair Borrower's ability to timely and fully perform its obligations under this Agreement, provided that the Reorganization shall not be deemed a Material Change. "Moody's" means Moody's Investors Service, Inc. "Normal Percentage" means, with respect to each Bank, the percentage under the heading "Normal Percentage" set forth opposite such Bank's name on Schedule 1 hereto, as such amount may be reduced or changed pursuant to Section 3.6 or Section 11.11. "Note" means any promissory note delivered pursuant to Section 2.8 or any Master Bid Rate Note (collectively, the "Notes"). "Notice of Assignment and Acceptance" means a Notice of Assignment and ----------------------------------- Acceptance substantially in the form of Exhibit H. --------- "Person" means any individual, firm, company, corporation, joint venture, joint-stock company, trust, unincorporated organization, governmental or state entity, or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing. "Plan" means any employee benefit pension plan which is subject to the provisions of Title IV of ERISA and which is maintained for employees of Borrower or any Subsidiary. "Principal Amount" means, when used with reference to any Loan, the amount requested in the Loan Request relating thereto and made available to Borrower by the Banks hereunder. "Principal Repayment Date" means, with respect to each Base Rate Loan, the Termination Date, and with respect to each Bid Rate Loan and each Eurodollar Loan, the last day of the Interest Period for such Loan. "Reference Banks" means Bank of America, Citibank, N.A., Morgan Guaranty Trust Company of New York and The Chase Manhattan Bank "Reorganization" means the transactions contemplated by that certain Agreement and Plan of Merger dated as of January 16, 1997 by and between HE Holdings and Raytheon Company including, without limitation the "GM Transactions" defined therein. "Reportable Event" means any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder excluding those events for which the 30-day notice requirement is waived, a withdrawal from a Plan described in Section 4063 of ERISA, or a cessation of operations described in Section 4062(e) of ERISA. "Restricted Subsidiaries" means each Subsidiary (i) having assets exceeding 10% of the Consolidated Tangible Net Worth of Borrower and its Subsidiaries on a consolidated basis or (ii) -9- having operating revenues exceeding 10% of the operating revenues of Borrower and its Subsidiaries on a consolidated basis, in each case as shown on the pro forma financial statements dated as of June 30, 1997 and, thereafter, as shown on the audited consolidated financial statements of Borrower and its Subsidiaries as of the end of the fiscal year immediately preceding the date of determination; provided, however, that "Restricted Subsidiary" shall not include any Subsidiary which is a corporation created solely to purchase receivables from Borrower or any of its Subsidiaries, and which would not, in accordance with GAAP, be included in the consolidated financial statements of Borrower. "S&P" means Standard & Poor's Ratings Group. "Shareholders' Equity" means, as of any date of determination for Borrower and its Subsidiaries on a consolidated basis, shareholders' equity as of that date determined in accordance with GAAP. "Short-Term Credit Agreement" means the Revolving Credit Agreement (364-day Facility) dated as of November 24, 1999 among Borrower, the banks named therein, Bank of America, N.A., as administrative agent, Salomon Smith Barney Inc., as syndication agent, and Deutsche Banc Alex. Brown, as documentation agent, as amended from time to time. "Signing Date" means December 5, 1997. "SPC" has the meaning specified in Section 11.11(c). "Subsidiaries" (individually a "Subsidiary") means those corporations or entities of which Borrower owns more than 50% of the voting securities. If Borrower, subject to the terms hereof, permits its ownership to fall to 50% or below of outstanding voting shares of any Subsidiary, such Subsidiary shall thereupon cease to be a Subsidiary for all purposes hereof. "Tax" and "Taxes" mean all taxes, levies, imposts, duties, fees or other charges of whatsoever nature however imposed by any country or any subdivision or authority of or in that country in any way connected with this Agreement or any instrument or agreement required hereunder, and all interest, penalties or similar liabilities with respect thereto, except such taxes as are imposed on or measured by any Bank's net income or capital and franchise taxes, by the country or any subdivision or authority of or in that country in which such Bank's principal office or actual Lending Office is located. "Termination Date" means December 5, 2002 or if such day is not a Business Day, the next preceding Business Day. "Total Commitment" means the aggregate amount of the Commitments. "Unmatured Event of Default" means an event which with the passage of time or the giving of notice, or both, would become an Event of Default. -10- "Utilization Fee" means the amount (expressed in basis points per annum) set forth in the chart below opposite the Applicable Level then in effect:
============================================================= Applicable Level Utilization Fee - ------------------------------------------------------------- Level 1 12.5 Level 2 12.5 Level 3 12.5 Level 4 12.5 Level 5 25.0 Level 6 25.0 =============================================================
"Voting Stock" means capital stock of Borrower having voting power under ordinary circumstances to elect directors of Borrower. "Withdrawal Liability" means, as of any determination date, the aggregate amount of the liabilities, if any, pursuant to Section 4201 of ERISA if the Borrower or any ERISA Affiliate made a complete withdrawal from all Plans and any increase in contributions pursuant to Section 4243 or ERISA. SECTION 2 THE CREDIT 2.1 The Commitments. (a) From time to time, during the Availability Period, each Bank severally agrees to lend to Borrower in U. S. Dollars the amount set forth opposite such Bank's name on Schedule 1 hereto, subject to reduction of such amount at Borrower's option, pursuant to Sections 3.5 and 3.6 or otherwise pursuant to Section 2.1(c). (b) Except as provided in subsection 2.1(d), each Bank shall make available to Borrower Base Rate Loans and Eurodollar Loans up to the amount of such Bank's Commitment. In addition, each Bank may, but shall not be required under any circumstances whatsoever to, make available to Borrower Bid Rate Loans. Except as provided in subsection 2.1(c), the Commitment of any Bank making a Bid Rate Loan shall not be reduced by the amount of any such Loan or Loans made by such Bank or by any other Bank. (c) The Principal Amount of Bid Rate Loans made by any Bank may exceed such Bank's Commitment; provided, however, that the aggregate Principal Amount -------- ------- of all Bid Rate Loans outstanding under this Agreement shall not exceed the Total Commitment. The Total Commitment shall be reduced by the Principal Amount of Bid Rate Loans outstanding so long as such Bid Rate Loans remain outstanding; and the Commitment of each Bank shall be reduced pro rata. -11- (d) During any period of time when Bid Rate Loans are outstanding, additional Eurodollar Loans and Base Rate Loans requested by Borrower shall be allocated among the Banks in accordance with their Normal Percentage as set forth in Schedule 1 and without regard to any Bid Rate Loans such Bank may have outstanding to Borrower. In no event shall Eurodollar Loans, Base Rate Loans and Bid Rate Loans outstanding hereunder exceed the Total Commitment as adjusted from time to time pursuant to this Section 2.1. 2.2 The Loans. Each Loan shall be a Base Rate Loan, a Eurodollar Loan or --------- a Bid Rate Loan and shall be in U. S. Dollars. Each Loan shall be in the minimum amount of $5,000,000 with any additional amounts in integral multiples of $1,000,000. This is a revolving credit, and Borrower may, during the Availability Period, reborrow amounts repaid or prepaid. No Loan nor any part of any Loan shall be repaid except at the times and in the manner expressly provided herein. 2.3 Requests for Base Rate and Eurodollar Loans. Each Base Rate Loan and ------------------------------------------- Eurodollar Loan shall be made upon irrevocable written or telephonic notice, confirmed promptly in writing, substantially in the form of Exhibit A-1 hereto, by Borrower to Administrative Agent received by Administrative Agent not later than 9:00 a.m. California time not less than three (3) Eurodollar Banking Days prior to the Borrowing Date (which must be a Eurodollar Banking Day) of a Eurodollar Loan and not later than 9:00 a.m. California time on the proposed Borrowing Date (which must be a Business Day) of a Base Rate Loan. Upon receipt of a request for a Base Rate Loan and Eurodollar Loan, Administrative Agent shall promptly notify the Banks of the amount, the Interest Period(s), if applicable, and the Borrowing Date requested by Borrower. After giving effect to any borrowing of Eurodollar Loans or any conversion or continuation of Eurodollar Loans, there shall not be more than 10 different Interest Periods for Eurodollar Loans and Bid Rate Loans in the aggregate at any time. 2.4 Requests for Bid Rate Loans. (a)Each Bid Rate Loan shall be made upon --------------------------- irrevocable written or telephonic notice, confirmed promptly in writing, substantially in the form of Exhibit A-2 hereto, by Borrower and must be received by Administrative Agent not later than 9:00 a.m. California time one Business Day prior to the Borrowing Date for such Loan, specifying the Borrowing Date (which must be a Business Day), the amount, and the Interest Period. In requesting a Bid Rate Loan, Borrower may specify up to a maximum of three alternative Interest Periods for the Bid Rate Loan. After giving effect to any borrowing of Bid Rate Loans, there shall not be more than 10 different Interest Periods for Bid Rate Loans and Eurodollar Loans in the aggregate at any one time. (b) Upon receipt of a request for a Bid Rate Loan pursuant to paragraph (a) above, Administrative Agent shall promptly notify the Banks of the amount, the Interest Period(s) and the Borrowing Date requested by Borrower. If Bank of America elects to advance a Bid Rate Loan it shall notify Borrower and Administrative Agent of the amount, the Interest Period(s) and the Bid Rate (with any fraction of a percentage expressed as a decimal to the nearest 1/10,000 of one percent) upon which Bank of America desires to advance such a Bid Rate Loan by 7:00 a.m. California time on such Borrowing Date. By 7:15 a.m. California time on the Borrowing Date, each other Bank shall notify Administrative Agent whether or not it will submit an offer in response to Borrower's request for a Bid Rate Loan and each Bank submitting an offer shall -12- notify Administrative Agent of the amount, the Interest Period(s) and the Bid Rate (with any fraction of a percentage expressed as a decimal to the nearest 1/10,000 of one percent) upon which such Bank desires to advance a Bid Rate Loan. By 7:30 a.m. California time on the Borrowing Date Administrative Agent shall give notice to Borrower, of the amount, the Interest Period and the Bid Rate upon which each Bank desires to advance a Bid Rate Loan. Borrower shall, before 7:45 a.m. California time on such Borrowing Date, elect which of the offered Bid Rate Loans it desires to accept and notify Administrative Agent of each offer that is being accepted by Borrower. Such acceptance by Borrower shall be irrevocable. If Borrower accepts any of the offers for Bid Rate Loans, Borrower must accept offers strictly based upon pricing and no other criteria. If two or more Banks submit offers at identical pricing and Borrower accepts any of such offers but does not wish to borrow the total amount offered by such Banks, Borrower shall accept offers from all of such Banks on amounts allocated among them pro rata (in multiples of $1,000,000) according to the amounts offered by such Banks. (c) If Borrower accepts one or more of the offers made by any Bank or Banks pursuant to subsection (b) above, Administrative Agent shall, by 8:15 a.m. California time on such Borrowing Date, notify each Bank as to the identity of each Bank which is to make a Bid Rate Loan, the amount of the Loan to be made by each Bank, the Interest Period, and the Bid Rate applicable to each such Loan. Administrative Agent shall also notify each Bank by 8:15 a.m. California time on such Borrowing Date if Administrative Agent has either received no offers in response to Borrower's Loan Request for a Bid Rate Loan or if Borrower has elected not to accept any of the offers received. (d) Each Bank whose offer for a Bid Rate Loan has been accepted pursuant to Section 2.4(b) shall determine for itself whether the conditions precedent in Section 5.2 have been or will be satisfied on the Borrowing Date. On or before 11:00 a.m. California time on the Borrowing Date, each such Bank's Lending Office will make available to Administrative Agent the principal amount of the Bid Rate Loan in immediately available funds and Administrative Agent shall promptly credit Borrower's account at Administrative Agent in immediately available funds. 2.5 Interest and Principal on Base Rate Loans. The outstanding Principal ----------------------------------------- Amount of each Base Rate Loan shall bear interest until payment is due in full (computed daily on the basis of a 365 or 366, as the case may be, day year and actual days elapsed) at the rate per annum equal to the Base Rate. Borrower shall pay interest on each Base Rate Loan on each Interest Payment Date for the interest accruing since the previous Interest Payment Date on such Base Rate Loan. Borrower shall repay in full the Principal Amount of each Base Rate Loan on the Termination Date or as provided in Section 2.10(c). 2.6 Interest and Principal on Eurodollar Loans. (a) The outstanding ------------------------------------------ Principal Amount of each Eurodollar Loan shall bear interest until payment is due in full (computed daily on the basis of a three hundred sixty (360) day year and actual days elapsed) at a rate per annum equal to the Eurodollar Rate plus ---- the Applicable Amount; plus, at all times until such time as the principal ---- amount of the Loans and the principal amount of the "Loans," as defined in the Short-Term Credit Agreement, have been reduced to zero, and thereafter with respect to each day on which the aggregate amount of outstanding Loans plus the aggregate amount of outstanding "Loans", as defined in the Short-Term Credit Agreement, exceeds 33% of the Aggregate Long- -13- Term and Short-Term Commitments, the Utilization Fee (computed daily on the basis of a three hundred sixty (360) day year and actual days elapsed). Borrower shall pay interest on each Eurodollar Loan on each Interest Payment Date for such Eurodollar Loan. Borrower shall repay in full the Principal Amount of each Eurodollar Loan on the last day of the Interest Period for such Eurodollar Loan or as provided in Section 2.10(c). (b) If any Reference Bank's Commitment shall terminate (otherwise than on termination of all the Commitments), or for any reason whatsoever the Reference Bank shall cease to be a Bank hereunder, that Reference Bank shall thereupon cease to be a Reference Bank, and the Eurodollar Rate shall be determined on the basis of the rates as notified by the remaining Reference Banks. Each Reference Bank shall use its best efforts to furnish quotations of rates to the Administrative Agent as contemplated hereby. If any of the Reference Banks shall be unable or otherwise fails to supply such rates to the Administrative Agent upon its request, the rate of interest shall be determined on the basis of the quotations of the remaining Reference Banks or Reference Bank. 2.7 Interest and Principal on Bid Rate Loans. The outstanding principal ---------------------------------------- amount of each Bid Rate Loan shall bear interest until payment is due in full (computed daily on the basis of a 360-day year and actual days elapsed) at a rate per annum equal to the Bid Rate. Borrower shall pay interest on each Bid Rate Loan on each Interest Payment Date for such Bid Rate Loan. Borrower shall repay in full the Principal Amount of each Bid Rate Loan on the last day of the Interest Period of such Bid Rate Loan. 2.8 Loan Accounts. Each Bank shall open and maintain on its books one or ------------- more loan accounts in Borrower's name. Each loan account shall show (without duplication) as debits thereto each Bank's portion of each Base Rate Loan and/or Eurodollar Loan and as credits thereto all Base Rate Loan and/or Eurodollar Loan payments received by such Bank for the account of such Bank and applied to principal so that the balance of the loan account(s) at all times reflect the principal amount due each Bank from Borrower as Base Rate Loans and Eurodollar Loans. All entries in said books shall be presumptive evidence of the making of each Base Rate Loan and Eurodollar Loan, the obligation of Borrower to repay each Base Rate Loan and Eurodollar Loan, and all payments received and disbursed by such Bank. Borrower agrees that if, in the opinion of any Bank, a promissory note or other evidence of debt is required or appropriate to reflect or enforce any Loans outstanding to or to be made by such Bank, then Borrower shall promptly execute and deliver to such Bank one or more promissory notes payable to such Bank to evidence the Loans outstanding to such Bank under this Agreement from time to time, together with such documents as such Bank may reasonably request to evidence the due authorization, execution, delivery and enforceability of such notes. If any notes are issued hereunder, Administrative Agent and Borrower may treat the payee of that note as the owner of such note for all purposes. 2.9 Master Bid Rate Notes. Borrower shall execute a Master Bid Rate Note --------------------- in the form of Exhibit B hereto in favor of each Bank. The Master Bid Rate Note of each Bank shall evidence the outstanding principal amount of Bid Rate Loans made by such Bank, and shall be dated the first day of the Availability Period. Each Bank is authorized to indicate upon the grid attached to its Master Bid Rate Note the principal amount, interest rate and Interest Period of -14- each Bid Rate Loan and all payments of principal and interest thereon. Such notations shall be presumptively correct as to the aggregate unpaid principal amount of the Bid Rate Loan made by such Bank, and interest due thereon, but the failure by such Bank to make such notations shall not affect the obligations of Borrower hereunder or under the Master Bid Rate Notes. 2.10 Conversion of Loans Between Eurodollar Loans and Base Rate Loans and -------------------------------------------------------------------- Conversion of Interest Periods of Eurodollar Loans. (a) On any Eurodollar - -------------------------------------------------- Banking Day Borrower may convert on a pro rata basis among the Banks any outstanding Base Rate Loans or Eurodollar Loans (but not Bid Rate Loans) into any other type of Loan available to Borrower hereunder (but not to a Bid Rate Loan), or Borrower may change the Interest Period of any Eurodollar Loan to another Interest Period available under this Agreement, subject to the following limitations: (i) No conversion of any Eurodollar Loan into any other Loan and no conversion of the Interest Period of any Eurodollar Loan may be made except on the last day of an Interest Period with respect thereto; and (ii) Any conversion shall be preceded by an irrevocable written or telephonic notice from Borrower that it elects such conversion, which notice shall be received by Administrative Agent at least three (3) Eurodollar Banking Days prior to the date requested for such conversion from or into a Eurodollar Loan or conversion of the Interest Period of a Eurodollar Loan. (b) Banks shall not be obligated to make or continue any Eurodollar Loan when any Event of Default has occurred and is continuing, but any outstanding Eurodollar Loan shall be automatically converted to a Base Rate Loan on the last day of the Interest Period for which a Eurodollar Rate was determined by Administrative Agent following occurrence of such Event of Default, and, unless Section 2.11(f) is applicable, Borrower shall be obligated to pay interest at the Base Rate from the date any Loan is so converted until such Loan is repaid in full regardless of the date when Administrative Agent obtains knowledge of such Event of Default. (c) Each conversion of a Loan into a Base Rate Loan or a Eurodollar Loan, as the case may be, shall be effected by each Bank, on behalf of Borrower, as applicable, by making a simultaneous payment of the relevant Eurodollar Loan, or Base Rate Loan, as the case may be, from the proceeds of the new Loans, procedures with respect thereto to be governed by the provisions of Section 2.3, except that disbursement shall be made by means of such payment rather than directly to Borrower to the extent applicable with respect to each Bank. (d) If upon the expiration of any Interest Period applicable to Eurodollar Loans, Borrower has failed to select a new Interest Period to be applicable thereto, or if any Event of Default or Unmatured Event of Default shall then exist, Borrower shall be deemed to have elected to convert such Eurodollar Loans into Base Rate Loans effective as of the expiration date of such current Interest Period. 2.11 Disbursements and Payments. (a) Each Base Rate Loan and Eurodollar -------------------------- Loan shall be made on a pro rata basis by Banks, and each Bank's portion of each Loan shall be -15- determined by application of its Normal Percentage. Each Bid Rate Loan shall be made entirely by the Bank whose offer was accepted by Borrower pursuant to Section 2.4. Each Bank's interest in each Loan and each payment to such Bank under this Agreement shall be for the account of such Bank's Lending Office. (b) Each Loan and each payment of principal, interest and other sums under this Agreement shall be made in immediately available funds (or such other funds as Administrative Agent may require) at Bank of America's Agency Administrative Services-West, 1850 Gateway Blvd., Concord, California 94520, ABA #111000012, Acct No. 3750836479, Ref: Hughes Electronics Corporation or such other office designated by Administrative Agent from time to time. (c) Each Bank agrees it will make the funds which it is to advance hereunder available to Bank of America's Agency Administrative Services-West, 1850 Gateway Blvd., Concord, California 94520, ABA #111000012, Acct No. 3750836479, Ref: Hughes Electronics Corporation or such other office designated by Administrative Agent from time to time not later than 11:00 a.m. California time on the Borrowing Date, and Administrative Agent will thereupon promptly advance to Borrower the amount so received from Banks. (d) Payment of all sums under this Agreement shall be made by Borrower to Administrative Agent, and the latter shall promptly distribute to each Bank its share of such payments. Each payment by Borrower shall be made without setoff or counterclaim and not later than 11:00 a.m. California time on the day such payment is due. All sums received after such time shall be deemed received on the next Business Day. (e) If Administrative Agent makes available to Borrower an amount due from any Bank which such Bank fails to make available to Administrative Agent, or if Administrative Agent makes available to any Bank an amount due from Borrower which Borrower fails to make available to Administrative Agent, Borrower or such Bank, as the case may be, shall, on demand, refund such amount to Administrative Agent, together with interest thereon for the period during which such amount was available to Borrower or such Bank, as the case may be, at the Federal Funds Rate. (f) Any sum of principal or interest payable by Borrower hereunder if not paid when due shall bear interest (payable on demand) from its due date until payment in full (computed daily on the basis of a 365 or 366, as the case may be, day year and actual days elapsed) at a rate per annum equal to the Base Rate plus one percentage point. 2.12 Facility Fee. Borrower shall pay Administrative Agent for the account ------------ of the Banks, a facility fee at the rate per annum equal to the Applicable Amount therefor on the Total Commitment (without regard to the amount of Loans outstanding at any time hereunder and without giving effect to any reduction pursuant to Section 2.1(c)) during the Availability Period; provided, however, following any reduction in the Total Commitment pursuant to Section 3.5 or 3.6 (but not a reduction pursuant to Section 2.1(c)) the computation of the facility fee shall be based upon such reduced Total Commitment as of the effective date of such reduction. The facility fee shall be computed on a calendar quarter basis. The facility fee shall be calculated on -16- the basis of a 360-day year and actual days elapsed, which results in a higher fee than if a 365/366-day year were used, and shall be payable on the 10th day of each January, April, July and October (for the facility fee accrued during the previous calendar quarter) and on the Termination Date. SECTION 3 PAYMENT OF COSTS AND REDUCTION OF THE COMMITMENT 3.1 Indemnification Upon Failure to Pay Eurodollar Loan or Bid Rate Loan. -------------------------------------------------------------------- If Borrower makes any payment of principal with respect to any Eurodollar Loan or Bid Rate Loan on a day other than the last day of the then current Interest Period applicable to such Loan (including without limitation any payment upon reduction of the Commitments) or fails to borrow, continue, convert, pay or prepay its Eurodollar Loan or Bid Rate Loan on a date designated to Administrative Agent in a notice pursuant to this Agreement (if such failure does not result from the application of Sections 4.1 or 4.2), Borrower shall reimburse each Bank within 15 days after receipt of written demand for any loss incurred by it as a result of the timing of such payment or non-borrowing not reflected in the Eurodollar Rate or the Bid Rate, including without limitation any loss incurred in liquidating or employing deposits from third parties and loss of profit for the period after such payment or non-borrowing. A certificate of such Bank setting forth the amounts reasonably necessary so to reimburse it in respect of any loss shall be conclusive and binding absent manifest error. 3.2 Increased Costs. (a) If after the date hereof, any applicable law, --------------- rule or regulation or any change therein or in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof or compliance by any Bank (or its Lending Office) with any request or directive of any such authority, central bank or comparable agency, whether or not having the force of law, shall impose, modify or deem applicable: (i) any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit, compulsory loan or similar requirements against assets, commitments or deposits or other liabilities with, of or for the account of, or credit extended by, or any acquisition of funds by or for the account of any Bank or its Lending Office or the London interbank market or any other condition affecting its obligations to make the Loans to Borrower hereunder; (ii) any capital or similar requirements against (or against any class of or change in or the amount of) assets or liabilities of, or commitments or extensions of credit by, such Bank; each Bank which is so affected shall give prompt notice to Borrower describing such reserves or requirements at least four Business Days prior to the date such Bank will begin to implement such additional charges with respect to Borrower. If the result of any of the foregoing is to increase the cost or reduce the profit to such Bank (or its Lending Office) under this Agreement by an amount deemed by such Bank to be material, then, within 15 days after written demand by -17- such Bank, Borrower will pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost incurred or reduction in profit suffered by such Bank. Such Bank will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not be otherwise disadvantageous to such Bank in the sole discretion of such Bank. A certificate of such Bank setting forth the basis for determining such additional amount or amounts necessary to compensate the Bank shall be conclusive in the absence of manifest error. (b) Without limiting the effect of the foregoing (but without duplication), upon any Bank's prior written request, Borrower shall pay to such Bank on the last day of each Interest Period, so long as such Bank may be required to maintain reserves against "eurocurrency liabilities" under Regulation D (as at any time amended) of the Board of Governors of the Federal Reserve System, as additional interest on the unpaid principal amount of each Eurodollar Loan by such Bank outstanding during such Interest Period, an additional amount (determined by such Bank and notified to Borrower in writing) up to but not exceeding such amount as would, together with payments of interest on such Eurodollar Loan for such Interest Period, result in the receipt by such Bank of total interest on such Eurodollar Loan, for such Interest Period at a rate determined by such Bank to be equal to the sum of: (i) the Eurodollar Rate divided by a sum equal to (a) 1 minus (b) the rate (expressed as a decimal) of such reserves required by Regulation D, plus (ii) the Applicable Amount for Eurodollar Loans. In determining the additional amount payable for an Interest Period pursuant to this Section, such Bank shall take into account any transitional adjustment or phase-in provisions of such reserve requirements applicable during such Interest Period, which would reduce the reserve requirement otherwise applicable to eurocurrency liabilities during such Interest Period; provided, however, each Bank in its sole discretion may determine the allocation of reserve requirements to its Eurodollar Loans. Each such determination made by such Bank, and each such notification by such Bank to Borrower under this Section, shall be conclusive as to the matters set forth therein in the absence of manifest error. 3.3 Taxes. All payments or reimbursements under this Agreement and any ----- instrument or agreement required hereunder shall be made without setoff or counterclaim and free and clear of and without deduction for any and all present and future Taxes. Borrower agrees to cause all such Taxes to be paid on behalf of any Bank or Administrative Agent directly to the appropriate governmental authority. If Borrower is legally prohibited from complying with this subsection, payments due to such Bank or Administrative Agent under this Agreement and any instrument or agreement required hereunder shall be increased so that, after provisions for Taxes and all Taxes on such increase, the amounts received by such Bank or Administrative Agent will be equal to the amounts required under this Agreement and any instrument or agreement required hereunder as if no Taxes were due on such payments. Borrower shall indemnify each Bank and Administrative Agent for the full amount of Taxes payable by such Bank or Administrative Agent and any liabilities (including penalties, interest and expenses) arising from such Taxes within 30 days from any written demand by such Bank. Borrower shall provide evidence that all applicable Taxes have been paid to the appropriate taxing authorities by -18- delivering to Administrative Agent official tax receipts or notarized copies or other evidence thereof satisfactory to Administrative Agent, within 90 days after the due date for such Tax payment. Such Bank will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such payment or reimbursement and will not be otherwise disadvantageous to such Bank in the sole discretion of such Bank. 3.4 Prepayment. Upon the irrevocable written notice of Borrower received ---------- by Administrative Agent by 11:00 a.m. California time at least one Business Day prior to the prepayment of a Base Rate Loan and at least five Eurodollar Banking Days prior to the prepayment of a Eurodollar Loan, Borrower may prepay any Eurodollar Loan or Base Rate Loan; but such prepayment shall be in an amount of at least $5,000,000 or multiple integrals of $1,000,000 in excess thereof. The notice of prepayment shall specify the date of the prepayment, the amount of the prepayment and the Loan to be prepaid. Each such prepayment shall be made on the date specified and, in the case of a prepayment of any Eurodollar Loan shall be accompanied by the payment of accrued interest on the amount prepaid. Subject to compliance with the foregoing procedures, Base Rate Loans may be prepaid at any time without cost or penalty of any kind. If Borrower elects to prepay a Eurodollar Loan, Borrower shall, on demand by each Bank, pay such Bank the amount (if any) by which (a) the additional interest which would have been payable on the amount prepaid on such Bank's portion of such Loan had it not been paid until the last day of the Interest Period of such Loan exceeds (b) the interest which would have been recoverable by such Bank by placing such prepaid amount on deposit in the offshore Dollar interbank markets for a period starting on the date on which it was prepaid and ending on the last day of the Interest Period for such Loan. Bid Rate Loans may not be prepaid. 3.5 Pro Rata Reduction of Commitments by Borrower. Borrower may, upon 30 --------------------------------------------- days' prior written notice (which notice shall be irrevocable) to Banks through Administrative Agent, reduce the Total Commitment on a pro rata basis among the Banks. Such a reduction shall be in an integral multiple of $5,000,000. Borrower shall, on the effective date of each such reduction, repay to each Bank through Administrative Agent that portion of each Loan which exceeds the amount of each Bank's Commitment as reduced, together with accrued interest on the amount paid and accrued facility fees subject to such reduction. After the effective date of each reduction, the Banks' obligations under this Agreement shall be based on the reduced Commitments. 3.6 Reduction of One Bank's Commitment by Borrower. If the amount of any ---------------------------------------------- payment to be made to or for the account of any Bank is increased under Section 3.3 or any Bank makes a claim under Section 3.2, then: (a) Borrower may, within 60 days after the notice thereof and by not less than five Business Days' written notice to Administrative Agent, cancel such Bank's Commitment, whereupon such Bank shall cease to be obligated to participate in further Loans hereunder and its Commitment shall be reduced to the amount of its outstanding Loans until such Loans are repaid by Borrower either on the Principal Repayment Date for such Loans or pursuant to Section 3.6(b), at which time such Bank's Commitment shall be reduced to zero; -19- (b) if Borrower cancels such Bank's Commitment pursuant to clause (a) above and if Borrower so elects by written notice to Administrative Agent given at the same time as the notice referred to in clause (a) above, Borrower shall prepay such Bank's portion of each outstanding Loan together with any accrued interest thereon plus all costs and expenses (including break and funding costs in connection with the relending, reborrowing, funding or other employing of funds) incurred by such Bank as a result of such cancellation or prepayment on a date other than the Principal Repayment Date for such Loan; and (c) Borrower shall repay all Bid Rate Loans from such Bank on the Principal Repayment Date for such Loans and shall not request any additional Bid Rate Loans from such Bank. 3.7 Notice of Reductions. Each notice of reduction or prepayment given -------------------- pursuant to Section 3.4, 3.5 or 3.6 shall be irrevocable, shall specify the date upon which such reduction or prepayment is to be made and, in the case of a notice of prepayment, shall obligate Borrower to make such prepayment on such date. Borrower may not give a notice of reduction of a part of the Commitment pursuant to Section 3.6 at any time prior to the date so specified in any previous such notice. 3.8 Designation of Replacement Bank. If the Commitment of any Bank is ------------------------------- cancelled by Borrower pursuant to Section 3.6 or if any Bank terminates its Commitment with respect to Eurodollar Loans pursuant to Section 4.2, Borrower, with the consent of Administrative Agent, may designate an Eligible Assignee (or, if it deems appropriate, more than one Eligible Assignee) acceptable to Administrative Agent to act as a Bank hereunder and upon execution of a written agreement in form satisfactory to Administrative Agent by such Eligible Assignee in which it agrees to abide by all of the terms, conditions and obligations applicable to a Bank herein and to have a Commitment as specified in such agreement, such Eligible Assignee shall be deemed a Bank hereunder to the same extent as if it were a signatory hereto and, thereafter, such Eligible Assignee shall for all purposes be considered a "Bank" hereunder. 3.9 Effect of Reduction of Commitment. If, at any time: --------------------------------- (a) the Commitment of any Bank is reduced to zero in accordance with the terms of this Agreement; (b) all indebtedness and other amounts owed to such Bank by Borrower hereunder or in connection herewith have been satisfied in full; and (c) such Bank is under no further actual or contingent obligation hereunder, then such Bank shall cease to be a party hereto and a Bank for the purposes hereof; provided, however, that the obligations of Borrower under Sections 3.1, -------- ------- 3.2, 3.3, 11.14, 11.15 and 11.16 shall survive the cancellation of the Commitment and the termination of this Agreement. 3.10 Accrued Fees. On the date of the cancellation of any portion of the ------------ Total Commitment in accordance with Section 3.5 or of any Bank's Commitment under Section 3.6, all accrued facility fees for such portion of the Total Commitment or of such Bank's Commitment shall be paid in full by Borrower. -20- 3.11 Survival. The agreements and obligations of Borrower in this Section -------- 3 shall survive the termination of this Agreement. SECTION 4 CHANGE IN CIRCUMSTANCES AFFECTING LOANS 4.1 Inability to Determine Eurodollar Rate. If any Reference Bank -------------------------------------- determines (which determination shall be made in good faith and shall be conclusive and binding upon Borrower) that (a) by reason of circumstances then affecting the Eurodollar interbank market, adequate and reasonable means do not or will not exist for ascertaining the interest rate applicable to any Eurodollar Loans, or (b) Dollar deposits in the relevant amounts and for the relevant Interest Period are not available to the Banks in the Eurodollar interbank market, then it shall notify the Administrative Agent who shall forthwith give written notice of such determination to Borrower and each Bank at least one Business Day prior to the first day of any Interest Period so affected; whereupon, until Administrative Agent shall notify Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Eurodollar Loans shall be suspended and (ii) Borrower shall repay in full, without premium or penalty, the then outstanding principal amount of the Eurodollar Loans, together with accrued interest thereon, on the last day of the then current Interest Period pursuant to the next sentence. Unless Borrower notifies Administrative Agent to the contrary within one Business Day after receiving a notice from Administrative Agent pursuant to this Section, Borrower shall, concurrently with prepaying the Eurodollar Loans pursuant to this Section, be deemed automatically without any further notice to Administrative Agent or the Banks to have requested and received Base Rate Loans in an equal principal amount from the Banks, the proceeds of which are deemed to have been used to repay the other Loans. 4.2 Illegality. If, after the Effective Date, the introduction of or any ---------- change in any applicable law, rule or regulation or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof or compliance by any Bank with any request or directive (whether or not having the force of law) of any such authority shall make it unlawful or impossible for such Bank (or its Lending Office) to make, maintain or fund its Eurodollar Loans, such Bank shall forthwith give written notice thereof to Administrative Agent and to Borrower. Before giving any notice pursuant to this Section, such Bank shall designate a different Lending Office if such designation will avoid the need for giving such notice and will not be otherwise disadvantageous to such Bank in the sole judgment of such Bank. Upon receipt of such notice (a) if such Bank has received a request with respect to Eurodollar Loans and has not yet made such Loan, a Base Rate Loan shall be deemed to have been designated without any further notice; (b) all Loans which would otherwise be made by such Bank as Eurodollar Loans shall be made instead as Base Rate Loans; and (c) Borrower shall prepay in full, without premium or penalty, the then outstanding principal amount of such Bank's Eurodollar Loans, together with accrued interest, on either (i) the last day of the then-current Interest Period if such Bank may lawfully continue to fund and maintain such Eurodollar Loans, to such day or (ii) immediately if such Bank may not lawfully continue to fund and maintain such Eurodollar Loans to such day together with an amount, if any, calculated as set forth in the last sentence of Section 3.4. Concurrently with prepaying each such Eurodollar Loan Borrower shall borrow a Base Rate Loan from such Bank in an amount equal to the principal amount of -21- such Bank's Eurodollar Loans, the proceeds of which are deemed to have been used to repay such Bank's Eurodollar Loans. If circumstances subsequently change so that such Bank is not further affected, and no Eligible Assignee has been appointed pursuant to Section 3.8, such Bank shall so notify Borrower and Administrative Agent and such Bank's obligation to make and continue Eurodollar Loans shall be reinstated upon written request of Borrower. SECTION 5 CONDITIONS PRECEDENT 5.1 Conditions Precedent to Signing Date. The occurrence of the Signing ------------------------------------ Date is subject to the condition that on the Signing Date this Agreement, duly executed and delivered by the parties hereto, shall have been delivered to Administrative Agent with counterparts for each Bank and in form and substance satisfactory to Banks. 5.2 Conditions Precedent to Effective Date. The obligation of Banks to -------------------------------------- make the initial Loans hereunder is subject to the condition that on the Effective Date there shall have been delivered to the Administrative Agent with counterparts for each Bank: (a) The Notes, duly executed and delivered by the Borrower. (b) The favorable written opinions, dated the Effective Date, of the General Counsel or Assistant General Counsel of Borrower in the form set out in Exhibit F. (c) Certificate of the Secretary or an Assistant Secretary of Borrower dated the Effective Date as to (i) the Certificate of Incorporation and the By- laws of Borrower, (ii) the resolution of the Board of Directors of Borrower or its Executive Committee in connection with this Agreement, and (iii) the incumbency and signatures of the person authorized to execute and deliver this Agreement and any other instrument, document or other agreement required hereunder on the Effective Date. (d) A certificate, signed by a vice president of Borrower dated the Effective Date certifying: (i) that since December 31, 1996, there has been no change in the financial condition, business, operations or properties of Borrower and its Subsidiaries taken as a whole which constitutes a Material Change; (ii) the unaudited pro forma condensed combined financial statements for the nine months ended September 30, 1997 contained in the General Motors Corporation. Registration Statement on form S-4 dated November 19, 1997, as amended (the "GMC S-4") give effect to the Reorganization as set forth in the GMC S-4; (iii) that no event has occurred and is continuing or would result from the making of a Loan which constitutes or would constitute an Event of Default or an Unmatured Event of Default; and (iv) the Debt Ratings as of the Effective Date. (e) Certificate of Good Standing in relation to Borrower issued by the Secretary of the State of Delaware, dated not more than one month prior to the Effective Date. (f) Evidence satisfactory to Administrative Agent that all obligations of Borrower outstanding under the Existing Agreement has been repaid in full and all commitments thereunder have been terminated. -22- (g) Evidence of Borrower's Debt Ratings from both S&P and Moody's. (h) Evidence satisfactory to Administrative Agent that the Reorganization has been completed in accordance with the GMC S-4. (i) The Master Bid Rate Notes, as referred to in Section 2.9, duly executed by Borrower, shall have been delivered by Borrower to Administrative Agent. (j) The Administrative Agent shall have received all fees payable to it on the Effective Date under the Letter Agreement. 5.3 Conditions Precedent to Loans. The obligation of Banks to disburse ----------------------------- each Loan (including the first Loan) is subject to the following conditions and by communicating a Loan Request Borrower is deemed to certify that: (a) to the best knowledge of the Authorized Designee making such Loan Request, the representations and warranties (excluding Section 6.6) contained in this Agreement and any other documents delivered pursuant hereto are true and correct in all material respects on the date of such Loan Request; (b) the financial statements delivered to Administrative Agent by Borrower pursuant to Section 7.5 on the date most nearly preceding the Loan Request present fairly the financial position and results of operation and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such statements relate, (subject, in the case of unaudited financial statements to year end adjustments); and (c) to the best knowledge of the Authorized Designee making such Loan Request, no Event of Default or Unmatured Event of Default has occurred and is continuing except such Events of Default or Unmatured Events of Default as have been expressly waived by or on behalf of the Banks. SECTION 6 REPRESENTATIONS AND WARRANTIES 6. Borrower represents and warrants that as of the Effective Date: 6.1 Authority of Borrower. Borrower (a) is a corporation duly organized --------------------- and existing under the laws of the State of Delaware, with its principal place of business in Los Angeles, California, (b) has the corporate power to own its property and carry on its business as now being conducted, (c) is duly qualified and authorized to do business, and is in good standing in every state, country or other jurisdiction where the failure to be so qualified, authorized and in good standing would have a material adverse effect on Borrower, (d) has full power and authority to borrow the sums provided for in this Agreement, to execute, deliver and perform this Agreement and any instrument or agreement required hereunder, and to perform and observe the terms and provisions hereof and thereof, (e) has taken all corporate action on the part of Borrower, its directors or stockholders, necessary for the authorization, execution, delivery and performance of this Agreement, and any instrument or agreement required hereunder on the date hereof, (f) requires no consent or approval of any trustee or holder of any indebtedness or obligation of Borrower to enter into, deliver or perform its obligations under this Agreement and the Notes, and (g) requires no consent, permission, authorization, order or license of any governmental authority in connection with the execution and delivery and performance of this Agreement and -23- any instrument or agreement required hereunder, or any transaction contemplated hereby, except as may have been obtained and certified copies of which have been delivered to Banks through Administrative Agent. 6.2 Binding Obligations. This Agreement is the legal, valid and binding ------------------- obligation of Borrower, enforceable against it in accordance with its terms, and any instrument or agreement required hereunder, when executed and delivered, will be similarly valid, binding and enforceable. 6.3 Incorporation of Restricted Subsidiaries. Each Restricted Subsidiary ---------------------------------------- of Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and, to the best of Borrower's knowledge, is duly licensed or qualified as a foreign corporation in all jurisdictions where the failure to be so qualified, authorized and in good standing would have a material adverse effect on Borrower and its Restricted Subsidiaries taken as a whole. 6.4 No Contravention. There is no charter, by-law, or capital stock ---------------- provision of Borrower and no provision of any indenture or material agreement, written or oral, to which Borrower is a party or under which Borrower is obligated, nor is there any statute, rule or regulation, or any judgment, decree or order of any court or agency binding on Borrower which would be contravened by the execution, delivery and performance of this Agreement, or any instrument or agreement required hereunder, or by the performance of any provision, condition, covenant or other term hereof or thereof. 6.5 Notices. Except as previously disclosed in writing to Administrative ------- Agent, no event has occurred which, to the best of its knowledge, would require Borrower to notify Administrative Agent and the Banks pursuant to Section 7.3 hereof. 6.6 Financial Statements. The financial statements dated December 31, -------------------- 1996 furnished by Hughes Electronics Corporation (as in effect prior to the Reorganization) to the Administrative Agent and Banks, present fairly the financial position and results of operation and changes in financial position of Hughes Electronics Corporation and its consolidated Subsidiaries as at the end of, and for the fiscal periods to which such statements relate, and such financial statements were prepared in accordance with GAAP. The unaudited pro forma condensed combined financial statements for the nine months ended September 30, 1997 contained in the GMC S-4 give effect to the Reorganization as set forth therein. Since the date of the unaudited pro forma condensed combined statements, there has been no Material Change. Neither Borrower nor any Subsidiary had any contingent obligations, liabilities for taxes or other outstanding financial obligations at September 30, 1997 on a pro forma basis which are material in the aggregate, except as disclosed in such unaudited pro forma condensed combined statements. 6.7 ERISA. Based upon ERISA and the regulations and published ----- interpretations thereunder, the Plans of Borrower and its Subsidiaries and, to the knowledge of Borrower, the Plans of any other ERISA Affiliates, are in material and substantial compliance in all material respects with the applicable provisions of ERISA and Borrower and its Subsidiaries are in -24- compliance with such Plans in all material respects. No Reportable Event which has or could be reasonably be expected to result in termination thereof by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer such Plan has occurred and is continuing with respect to any Plan. 6.8 Regulation U. Borrower is not engaged principally, or as one of its ------------ important activities, in the business of extending credit for the purposes of purchasing or carrying any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System; and neither Borrower nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940. 6.9 Taxes. Borrower has filed all federal and state tax returns which to ----- the knowledge of the financial officers of Borrower are required to have been filed, and has paid prior to delinquency all taxes that have become due pursuant to said returns or pursuant to any assessment, except as are being contested in good faith by appropriate proceedings and as to which adequate reserves have been provided on the books of Borrower in accordance with GAAP. 6.10 Insurance. Borrower and its Restricted Subsidiaries maintain --------- insurance with responsible insurance companies, in such amounts and against such risks as is customarily carried by owners of similar businesses and property, including protection against loss of use and occupancy, to the extent such insurance is reasonably available at commercially reasonable rates, and it will furnish Administrative Agent, upon written request, with full information as to the insurance carrier; provided, however, that Borrower and its Restricted -------- ------- Subsidiaries may self insure to the extent they deem prudent. 6.11 Liens. The properties and assets of Borrower and its Restricted ----- Subsidiaries, real, personal and mixed, are not subject to any Liens, except for Liens permitted by this Agreement. SECTION 7 AFFIRMATIVE COVENANTS OF BORROWER 7. Borrower covenants and agrees that so long as the credit hereby granted shall remain available in whole or in part or until the full and final payment of all indebtedness incurred hereunder, unless Majority Banks waive compliance in writing: 7.1 Use of Proceeds of Loans. It will use the proceeds of the Loans made ------------------------ by Banks to Borrower hereunder for the repayment of Commercial Paper and for its general working capital requirements, including acquisition and improvement of plant, property and equipment and acquisitions. 7.2 Management of Business. It will manage its business and conduct its ---------------------- affairs such that the representations and warranties contained in Sections 6.1 through 6.3 and 6.7 through 6.9 remain true and correct at all times during the Availability Period. -25- 7.3 Notice of Certain Events. It will, and it will cause each of its ------------------------ Restricted Subsidiaries to, give prompt written notice to Administrative Agent (who shall promptly notify the Banks) of: (a) all Events of Default or Unmatured Events of Default under any of the terms or provisions of this Agreement; (b) any event of default under any other agreement, contract, indenture, document or instrument entered, or which may be entered, into by it that could, if settled unfavorably, result in a Material Change; (c) all material changes in senior management otherwise publicly announced; (d) all litigation, arbitration or administrative proceedings involving Borrower or any of its Subsidiaries which could in the reasonable opinion of Borrower be expected to result in a Material Change; (e) any other matter which has resulted in, or might in the reasonable opinion of Borrower result in, a Material Change; (f) concurrently with the public announcement thereof, any proposed Merger or Disposition affecting any Restricted Subsidiary; and (g) any change in any Debt Rating by S&P or Moody's. 7.4 Records. It will, and it will cause each of its Restricted ------- Subsidiaries to, keep and maintain full and accurate accounts and records of its operations according to GAAP and will permit Administrative Agent, and its designated officers, employees, agents, and representatives, to have access thereto and to make examination thereof at all reasonable times, to make audits, and to inspect and otherwise check its properties, real, personal and mixed; provided, however, that such examination and access shall be in compliance with - -------- ------- security and confidentiality requirements of all governmental authorities and, subject to Section 11.16, Borrower's corporate policies. 7.5 Information Furnished. It will furnish to Banks and Administrative --------------------- Agent: (a) Within 60 days after the close of each quarter, except for the last quarter of each fiscal year, its consolidated balance sheet as of the close of such quarter and its consolidated profit and loss statement and cash flow statement for that quarter and for that portion of the fiscal year ending with such quarter, all prepared in accordance with GAAP, and all certified by its Treasurer or an Assistant Treasurer as presenting fairly the financial position and results of operation and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such statements relate, subject to normal year-end adjustments. (b) Within 120 days after the close of each fiscal year, a complete copy of its annual financial statements, which statements shall include at least its consolidated balance sheet as of -26- the close of such fiscal year and its consolidated profit and loss statement and cash flow statement for such fiscal year, prepared by Deloitte & Touche (or such other independent certified public accountants of recognized international standing selected by Borrower) in accordance with GAAP applied on a basis consistent with that of the previous year, and which statements shall include the opinion of such accountants, such opinion not to be qualified or limited because of any restricted or limited nature of examination made by such accountants or because of a "going concern" qualification. (c) Within 60 days after the close of each quarter except for the last quarter of each fiscal year, (and within 120 days after the close of each fiscal year) its certificate executed by Borrower's Treasurer or an Assistant Treasurer that (i) the representations and warranties set forth in Section 6 (with the exception of Section 6.6) are true and correct in all material respects; and (ii) no Event of Default or Unmatured Event of Default has occurred and is continuing except such Events of Default or Unmatured Events of Default as have been expressly waived by or on behalf of the Banks. (d) concurrently with the delivery of the financial statements referred to in clauses (a) and (b), a duly completed Compliance Certificate signed by --- --- Borrower's Treasurer or an Assistant Treasurer; (e) Such other information concerning its affairs as Administrative Agent or the Majority Banks may reasonably request. 7.6 Execution of Other Documents. It will promptly, upon demand by ---------------------------- Administrative Agent, execute all such additional agreements, documents and instruments in connection with this Agreement as Administrative Agent or Majority Banks may deem necessary. 7.7 ERISA. It will, and it will cause each of its Subsidiaries to: ----- (a) At all times, make prompt payment of contributions required to meet the minimum funding standard set forth in ERISA with respect to its Plans, except to the extent that waivers are granted by the appropriate governmental agencies; (b) Notify Administrative Agent immediately of (i) any Reportable Event which could reasonably be expected to result in aggregate liability to Borrower and its Subsidiaries in excess of $75,000,000 and (ii) any other fact arising in connection with any of its Plans or a Plan of any ERISA Affiliate which has resulted, or could reasonably be expected to result, in termination thereof by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer such Plan, in each case together with a statement, if requested by Administrative Agent, as to the reasons therefor and the action, if any, which Borrower or such ERISA Affiliate proposes to take with respect thereto; and (c) Furnish to Administrative Agent, upon its written request, such information concerning any of its Plans as may be reasonably requested. 7.8 Administrative Agent's Fees. It will compensate Administrative Agent --------------------------- as set forth in the Letter Agreement. -27- 7.9 Compliance with Law. It will, and will cause each of its Subsidiaries ------------------- to, comply with the requirements of all applicable laws, rules, regulations, and orders of any governmental or regulatory authority, a breach of which would result in a Material Change, except where contested in good faith by appropriate proceedings diligently pursued. SECTION 8 NEGATIVE COVENANTS OF BORROWER 8. Borrower covenants and agrees that so long as the credit hereby granted shall remain available in whole or in part or until the full and final payment of all indebtedness incurred hereunder, unless Majority Banks waive compliance in writing: 8.1 Liens. ----- (a) Borrower will not, nor will it permit any Restricted Subsidiary to, issue, incur, guaranty or assume any indebtedness for money borrowed secured by a Lien upon any property or assets of Borrower or any Restricted Subsidiary or upon any shares of stock or indebtedness of any Restricted Subsidiary (whether such property, assets, shares of stock or indebtedness are now owned or hereafter acquired) without in any such case effectively providing concurrently with the issuance, incurrence, guarantee or assumption of any such indebtedness that the Commitments and Loans and any other obligations of Borrower to the Banks (together with, if Borrower shall so determine, any other indebtedness of Borrower or such Restricted Subsidiary ranking equally with the Commitments and Loans and such other obligations and then existing or thereafter created) shall be secured equally and ratably with or prior to such indebtedness by a Lien upon such property, assets, shares of stock or indebtedness, unless the aggregate amount of such indebtedness for money borrowed secured by such Liens, together with all other indebtedness for money borrowed of Borrower and its Subsidiaries which (if originally issued, incurred, guaranteed or assumed at such time) would otherwise be subject to the foregoing restrictions (but not including indebtedness for money borrowed permitted to be secured under sub-clauses (1) through (7) of Section 8.1(b)), does not at the time exceed 5% of Consolidated Adjusted Net Worth. (b) The above restrictions shall not apply to indebtedness of Borrower or any of its Restricted Subsidiaries secured by: (1) Liens existing as of the date hereof and listed in Exhibit E; (2) Liens on property, assets, shares of stock or indebtedness of any corporation existing at the time such corporation becomes a Restricted Subsidiary; (3) Liens on property existing at the time of acquisition of such property by Borrower or a Restricted Subsidiary, or Liens to secure the payment of all or any part of the purchase price of property upon the acquisition of such property by Borrower or a Restricted Subsidiary or to secure any indebtedness incurred or guaranteed prior to, at the time of, or within 180 days after, the later of the date of acquisition of such property and the date such property is placed in service, for the purpose of financing all or any part of the purchase price thereof, or Liens to secure any indebtedness incurred or guaranteed for -28- the purpose of financing the cost to Borrower or a Restricted Subsidiary of improvements to such acquired property; provided, however, that for -------- ------- purposes of this clause 3, (i) a satellite will be treated as a newly- acquired asset as of the date it is placed in service and (ii) any satellite transponder acquired through the exercise of an early buy-out option shall be treated as a newly-acquired asset as of the date such option is exercised; (4) Liens securing indebtedness of a Restricted Subsidiary owing to Borrower or to another Restricted Subsidiary; (5) Liens on property of a corporation existing at the time such corporation is merged or consolidated with Borrower or a Restricted Subsidiary (in accordance with Section 8.2) or at the time of a sale, lease or other disposition of the properties of a corporation as an entirety or substantially as an entirety to Borrower or a Restricted Subsidiary; (6) Liens on property of Borrower or a Restricted Subsidiary in favor of the United States of America or any state thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any state thereof, or in favor of any other country, or any political subdivision thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such Liens; or (7) any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any Liens referred to in the foregoing sub-clauses (1) to (6), inclusively; provided, however, that -------- ------- the principal amount of indebtedness secured thereby shall not exceed the principal amount of indebtedness so secured at the time of the incurrence or guarantee thereof and that such extension, renewal or replacement shall be limited to all or a part of the property which secured the Lien so extended, renewed or replaced (plus improvements on such property). 8.2 Mergers, Liquidations and Sales of Assets. It will not, nor will it ----------------------------------------- permit any of its Restricted Subsidiaries to liquidate or dissolve or enter into any consolidation, merger, partnership, joint venture, syndicate, pool or other combination which results in a Material Change in the nature of Borrower's business taken as a whole (collectively, the "Mergers") or convey, sell or lease all or substantially all of its assets or business (collectively, "Dispositions"), except for: (a) mergers between Subsidiaries, or between Subsidiary and Borrower where Borrower is the surviving corporation; (b) mergers where Borrower is the surviving corporation; (c) transfers of assets from one Restricted Subsidiary to another Restricted Subsidiary or from any Restricted Subsidiary to Borrower; -29- (d) sales, leases, transfers or assignments of operating rights, licenses or franchises in transactions which do not result in a Material Change different from changes heretofore publicly disclosed; (e) Dispositions of any Restricted Subsidiary provided both Debt Ratings remain Investment Grade on the effective date of any such dispositions; and (f) the Reorganization; provided, however, no Disposition or Merger otherwise permitted by clauses (a) - -------- ------- through (e) above shall take place if before, or after giving effect to any such Disposition or Merger, an Event of Default or Unmatured Event of Default exists is or would exist. 8.3 Defaults. It will not, nor will it permit any of its Restricted -------- Subsidiaries to, commit or do any act or thing which would constitute an event of default under any of the material terms or provisions of any other material agreement, contract, indenture, document or instrument executed, or to be executed by any of them, except those that may be contested in good faith and would not, if settled unfavorably, result in a Material Change. 8.4 Compliance with Regulations. Borrower will not engage principally, or --------------------------- as one of its important activities, in the business of extending credit for the purposes of purchasing or carrying any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System; and it will not use the proceeds of any Loan for the purpose, directly or indirectly, whether immediate, incidental or ultimate, (a) to purchase or carry, within the meaning of such Regulation U, any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock, unless done in strict compliance with such Regulation U and other applicable law and Borrower shall have executed and delivered to each Bank prior to such use a Form U-1 statement evidencing compliance with such Regulation U and such other documents relating thereto as Administrative Agent or any Bank shall request, or (b) in a manner which would violate, or result in a violation of, Regulation G, T, U, or X of the Board of Governors of the Federal Reserve System. 8.5 Financial Covenants. ------------------- (a) Shareholders' Equity. Borrower will not permit Shareholders' Equity as at the end of any fiscal quarter to be less than the sum of (i) $7,125,000,000, (ii) an amount equal to 50% of Borrower's consolidated net income (as determined in accordance with GAAP) earned in each fiscal quarter ending after December 31, 1998 (with no deduction for a net loss in any such fiscal quarter) and (iii) an amount equal to 50% of the aggregate increase in Shareholders' Equity after December 31, 1998 by reason of the issuance of capital stock of Borrower (including upon any conversion of debt securities of Borrower into such capital stock). (b) Leverage Ratio. Borrower shall not permit the Leverage Ratio as at the -------------- end of any fiscal quarter set forth below to be greater than the ratio set forth below opposite such fiscal quarter: -30- Maximum Fiscal Quarters Ending Leverage Ratio ------------------------------------------------------- December 31, 1999 4.00 March 31, 2000 4.50 June 30, 2000 4.00 September 30, 2000 4.00 December 31, 2000 3.75 and thereafter (c) For the purposes of the financial covenants contained in subsections (a) and (b) herein, the financial statements of Borrower's subsidiary, DirecTV Japan, Ltd. will be treated as consolidated with the financial statements of Borrower (whether or not required by GAAP) from the Effective Date through December 31, 2000, and thereafter (i) if such consolidation is required by GAAP or (ii) if Borrower or one or more of its Subsidiaries own securities of DirecTV Japan, Ltd. convertible into equity interests in DirecTV Japan, Ltd., which when combined with other equity interests owned by Borrower or one or more of its Subsidiaries, would result in Borrower and its Subsidiaries having more than a 50% interest in the profits or capital of DirecTV Japan, Ltd. SECTION 9 EVENTS OF DEFAULT 9.1 Events of Default. If one or more of the following described Events ----------------- of Default shall occur: (a) Borrower shall default in the due and punctual payment of (i) the principal of or the interest on any Loan within two Business Days of its due date, (ii) any fee due hereunder within 10 Business Days of its due date; or, (iii) any other amount due from it hereunder within 30 Business Days of its due date; or (b) Borrower or any of its Restricted Subsidiaries shall fail to perform or observe any of the terms, provisions, covenants, conditions, agreements or obligations contained herein (other than Section 7.3, and Sections 8.1 through 8.5,) and such failure shall continue for more than 20 days after written notice from Administrative Agent to Borrower of the existence and character of such failure to perform or observe; or (c) Borrower or any of its Restricted Subsidiaries shall fail to perform or observe any of the terms, provisions, covenants, conditions agreements or obligations contained in Section 7.3 and Sections 8.1 through 8.5; or (d) (i) Borrower, or any of its Restricted Subsidiaries shall become insolvent, or be unable, or admit in writing its inability, to pay its debts as they become due; or (ii) Borrower or any Restricted Subsidiary shall make an assignment for the benefit of creditors or to an agent -31- authorized to liquidate any substantial amount of its properties or assets; or (iii) Borrower or any Restricted Subsidiary shall file or have filed against it a petition in bankruptcy or seeking reorganization or to effect a plan or other arrangement with creditors or winding up or dissolution and such filing against it shall not be dismissed within 60 days after the date of such filing; or (iv) Borrower or any Restricted Subsidiary shall apply for or consent to the appointment of or consent that an order be made appointing any receiver or trustee for any of its or their properties, assets or business, or if a receiver or a trustee shall be appointed for all or a substantial part of its or their properties, assets or business; or (v) an order for relief shall be entered against Borrower or any Restricted Subsidiary under the United States federal bankruptcy laws as now or hereafter in effect; or (vi) Borrower or any Restricted Subsidiary shall take any action indicating its consent to, approval of or acquiescence in, any of the foregoing; or (e) Any representation or warranty made by Borrower herein or in any certificate or financial or other statement heretofore or hereafter furnished by Borrower or any of its officers to Administrative Agent or the Banks proves to be in any material respect false or misleading as of the date when made, deemed made or reaffirmed; or (f) Any final judgment, decrees, writs of execution, attachments or garnishments or any Liens, or any other legal processes shall be issued or levied against any of the assets or property of Borrower or any of its Restricted Subsidiaries (and shall not have been vacated, discharged or stayed) in amounts which in the aggregate would result in a Material Change (without limiting the generality of the foregoing, a judgment in excess of $75,000,000 in the aggregate shall, for purposes only of this Section 9.1(f), be deemed to result in a Material Change); provided, however, that such aggregate amount -------- ------- shall include only amounts in excess of (i) insurance coverage therefor and (ii) reserves on the books of Borrower or any of its Restricted Subsidiaries therefore; provided, further, that such aggregate amount shall not include any -------- ------- amounts with respect to matters subject to appeal conducted in good faith and diligently pursued or other further legal process by Borrower or any of its Restricted Subsidiaries or any amounts with respect to any such legal process which Borrower or any of its Restricted Subsidiaries has detached from such property by posting of a bond or equivalent process; or (g) All, or substantially all, of the assets and property of Borrower or any of its Restricted Subsidiaries shall be condemned, seized or otherwise appropriated; or (h) Any fact or circumstance (including without limitation a Reportable Event), which results in, or which Majority Banks determine in good faith could reasonably be expected to result in, the termination of any Plan of Borrower, any of its Subsidiaries or any ERISA Affiliate by the Pension Benefit Guaranty Corporation or the appointment by an appropriate United States District Court of a trustee to administer any such Plan, shall occur and shall continue for 30 days after written notice of such determination shall have been given to Borrower or any of its Subsidiaries by Administrative Agent, or a trustee shall be appointed by the appropriate United States District Court to administer any Plan of Borrower or any of its Subsidiaries, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any Plan of Borrower or any of its Subsidiaries or to appoint a trustee to administer any such Plan and, upon the occurrence of any of the foregoing, the aggregate amount of the unfunded vested liability for the benefits guaranteed by the Pension Benefit Guaranty Corporation under all such Plans and the -32- present value of any Withdrawal Liability which remains unpaid is reasonably estimated to be in excess of $75,000,000 and such liability is not covered by insurance; or (i) Borrower or any of its Restricted Subsidiaries (i) fails to make any payment (or otherwise satisfy) in respect of any indebtedness for money borrowed when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the document relating thereto on the date of such failure; or (ii) an event of default shall occur which permits the acceleration of indebtedness for money borrowed under any other agreement, contract, indenture, document or instrument executed, or which may be executed, by Borrower or any of its Restricted Subsidiaries, which failure or event of default has not been waived or cured; provided, however, that no Event of -------- ------- Default shall exist hereunder if the amount of the indebtedness which is not paid or may be accelerated with respect to the defaulted obligations shall not exceed in the aggregate $75,000,000; or (j) [Intentionally omitted]; (k) Any disposition of any Restricted Subsidiary shall have occurred, and: (i) prior to such disposition, either S&P or Moody's shall have publicly announced that Borrower's Debt Rating will be below Investment Grade after giving effect to such disposition; or (ii) as soon as reasonably practicable after its public announcement of such disposition, Borrower shall not have requested S&P and Moody's to publicly announce, prior to or no later than concurrently with the consummation of such disposition, that Borrower's Debt Rating will remain at least Investment Grade after giving effect to such disposition; or (iii) notwithstanding clause (ii), either S&P or Moody's shall not have publicly announced within 10 days after the consummation of such disposition that Borrower's Debt Ratings will remain at least Investment Grade after giving effect to such disposition; or (l) Any sale, spin-off, disposition or other transaction whereby General Motors Corporation will no longer beneficially own directly or indirectly at least 51 percent of the issued and outstanding capital stock of Borrower having voting power under ordinary circumstances to elect directors of Borrower (a "transaction") shall have occurred and: (i) prior to such transaction, either S&P or Moody's shall have publicly announced that its Debt Rating will be below Investment Grade after giving effect to such transaction; or (ii) as soon as reasonably practicable after its public announcement of such transaction, Borrower shall not have requested S&P and Moody's to publicly announce, prior to or no later than concurrently with the consummation of such transaction, that -33- Borrower's Debt Rating will remain at least Investment Grade after giving effect to such transaction; or (iii) notwithstanding clause (ii), either S&P or Moody's shall not have publicly announced within 10 days after the consummation of such transaction that its Debt Ratings will remain at least Investment Grade after giving effect to such transaction. Then (a) automatically upon the occurrence of an Event of Default under Section 9.1(d), the Commitments shall immediately terminate, and all Loans and other liabilities and obligations outstanding under this Agreement shall, without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived, be forthwith due and payable, if not herein otherwise then due and payable, together with all costs and expenses (including break and funding costs and other costs in connection with the relending, reborrowing, funding or other employing of funds) incurred by the Banks as a result thereof, anything herein or in any agreement, contract, indenture, document or instrument contained to the contrary notwithstanding; and (b) at any time after the occurrence of an Event of Default other than under Section 9.1(d), and in each and every such case, unless such Event of Default shall have been remedied by Borrower to the satisfaction of Majority Banks or waived in writing by Majority Banks (except in the case of an Event of Default under Section 9.1(a), the waiver of which shall require the consent of all the Banks), Administrative Agent may, with the consent of the Majority Banks, or shall, upon the direction of Majority Banks, immediately terminate the Commitments, whereupon the same shall be cancelled and reduced to zero and any Loan Request given in respect of a Borrowing Date occurring on or after the date of such notice of cancellation shall cease to have effect and all Loans and all accrued interest thereon and all other liabilities and obligations outstanding under this Agreement shall, thereupon, without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived, be forthwith due and payable, if not otherwise then due and payable, together with all reasonable costs and expenses (including break and funding costs and other costs in connection with the relending, reborrowing, funding or other employing of funds) incurred by the Banks as a result thereof, anything herein or in any other agreement, contract, indenture, document or instrument contained to the contrary notwithstanding. Thereafter any Bank or the Banks may immediately, and without expiration of any period of grace, enforce payment of all liabilities and obligations of Borrower under this Agreement. 9.2 Recovery of Amounts Due. If any amount payable hereunder is not paid ----------------------- as and when due, Borrower hereby authorizes Administrative Agent, each Bank and their respective affiliates to proceed, to the fullest extent permitted by applicable law, without prior notice, by right of set-off, banker's lien or counterclaim, against any moneys or other assets of Borrower in any currency that may at any time be in the possession of Administrative Agent or any of its affiliates or such Bank or any of its affiliates, at any branch or office thereof, to the full extent of all amounts payable to Administrative Agent and the Banks hereunder. Any Bank that so proceeds or that has an affiliate that so proceeds shall forthwith give notice to Administrative Agent of any action taken by such Bank or affiliate pursuant to this Section 9.2. -34- 9.3 Rights Cumulative. The rights of Administrative Agent and the Banks ----------------- provided for herein are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity. SECTION 10 THE BANKS 10.1 Administration of Loan. The general administration of the Loans shall ---------------------- be by Administrative Agent and shall be governed by the provisions set forth in Exhibit C attached hereto and incorporated herein by reference. 10.2 Representations By Banks. Each Bank hereby represents that it will ------------------------ make each Loan hereunder in the ordinary course of its business and not with a view to engage in any distribution of any evidence of indebtedness to the public and any participation or disposition of the Master Bid Rate Note shall not, without the consent of Borrower, require Borrower to file a registration statement with the Securities and Exchange Commission or apply to qualify any Master Bid Rate Note under the blue sky law of any state; provided, however, disposition of any evidence of indebtedness held by such Bank shall at all times be within its exclusive control subject only to the provisions of Section 11.11 and Section 10 of Exhibit C. SECTION 11 MISCELLANEOUS PROVISIONS 11.1 Amendments and Waivers. No amendment or waiver of any provision of ---------------------- this Agreement, and no consent with respect to any departure by Borrower therefrom, shall be effective unless the same shall be in writing and signed by Majority Banks (or by the Administrative Agent at the written request of Majority Banks) and the Borrower and acknowledged by Administrative Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such -------- ------- waiver, amendment, or consent shall, unless in writing and signed by all Banks and Borrower and acknowledged by Administrative Agent, do any of the following: (a) increase or extend the Commitment of any Bank (or reinstate any Commitment terminated pursuant to Section 9.1); (b) postpone or delay any date fixed by this Agreement for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder; (c) reduce the principal of, or the rate of interest specified herein on any Loan, or any fees or other amounts payable hereunder; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Banks or any of them to take any action hereunder; or (e) amend this Section or any provision herein providing for consent or other action by all Banks; provided, -------- further, that no amendment, waiver or consent shall, unless in writing and - ------- signed by Administrative Agent in addition to Majority Banks or all Banks, as the case may be, affect the rights or duties of Administrative Agent under this Agreement or rights or privileges thereunder. 11.2 Notices. All notices, payments, requests, reports, information, ------- demands and other communications which any party hereto may desire, or may be required, to give or make to any other party hereto, shall (unless otherwise permitted as a telephonic notice or request hereunder) -35- be given by mailing the same, postage prepaid, or by telex, or rapifax transmission, or by hand delivery or courier, to each party at its address set forth in Exhibit D attached hereto and incorporated herein by reference, or to such other address as may, from time to time, be specified in writing by Borrower or any Bank. Such communications shall be deemed to have been duly given and received in the case of a telex, when the telex is sent and the appropriate answer-back is received, in the case of mail when sent by pre-paid certified or registered mail correctly addressed to the addressee, in the case of rapifax transmission, when transmission has been sent, in the case of hand delivery or courier, when received. Administrative Agent may rely and act upon any Loan Request made by telex or other telexed, telephonic or facsimile instructions to Administrative Agent by any Person purporting to be an authorized Person of Borrower, and Borrower shall be unconditionally and absolutely estopped from denying the authenticity and validity of any transaction or act made by Administrative Agent or any Bank in reliance thereon. Each party hereto shall promptly confirm by telex or rapifax any telephone communication made by it to another pursuant to this Agreement but the absence of such confirmation shall not affect the validity of such communication, which shall be effective upon receipt. If there is any conflict between any telephonic communication and a written confirmation, the written communication shall govern; provided, however, that the recipient of such communication shall be -------- ------- held harmless by all parties hereto with respect to any action taken in reliance on the telephonic communication prior to the time such recipient receives and has had reasonable time to review the subsequent written confirmation and initiate such corrective action as the recipient deems reasonable under the circumstances. 11.3 Waiver. Neither the failure of, nor any delay on the part of, any ------ party hereto in exercising any right, power or privilege hereunder, or under any agreement, contract, indenture, document or instrument mentioned herein, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder, or under any agreement, contract, indenture, document or instrument mentioned herein, preclude other or further exercise thereof or the exercise of any other right, power or privilege; nor shall any waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned herein, constitute a waiver of any other right, power, privilege or default or constitute a waiver of any other default of the same or of any other term or provision. All rights and remedies herein provided are cumulative and not exclusive of any rights or remedies otherwise provided by law. 11.4 California Law. The interpretation, enforcement and effect of this -------------- Agreement, the Loans and any agreements, contracts, indentures, documents or instruments delivered in accordance herewith, shall be governed and controlled in all respects by and construed according to the substantive laws of the State of California, to the jurisdiction of whose courts the parties hereto hereby agree to submit. 11.5 Headings. The headings set forth herein are solely for the purpose of -------- identification and shall not be construed as a part of the sections or subsections which they head. 11.6 Accounting Terms. All accounting terms not otherwise defined herein ---------------- have the meaning assigned to them in accordance with GAAP, provided, however, any act or condition in -36- accordance herewith and permitted hereunder when taken, created or occurring, shall not become a violation of any section of this Agreement as a result of a subsequent change in GAAP. 11.7 Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the different parties hereto on separate counterparts, and all of said counterparts taken together shall constitute one and the same instrument. 11.8 Written Disclosure. Wherever written disclosure by Borrower to Banks ------------------ is required or permitted by this Agreement, written disclosure to Administrative Agent by Borrower shall constitute such disclosure. 11.9 Singular; Plural. Whenever used herein, the singular number shall ---------------- include the plural, the plural the singular, and the use of any gender shall be applicable to all genders. 11.10 Illegality. The illegality or unenforceability of any provision of ---------- this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 11.11 Assignments. This Agreement shall bind and inure to the benefit of ----------- the parties hereto and their respective successors and assigns. No party hereto may assign or transfer all or any part of its rights and obligations hereunder, except that: (a) Any Bank may, with the prior written consent of Borrower at all times other than during the existence of an Event of Default, and Administrative Agent, which consents shall not be unreasonably withheld, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of Borrower or the Administrative Agent shall be required in connection with any assignment and delegation by Bank to an Approved Bank Affiliate of such Bank or another Bank) (each an "Assignee"), all, or any ratable part of all, of the Loans, the Commitments and the other rights and obligations of such Bank hereunder; provided, however, that any assignment to an Eligible Assignee which is not a Bank or an Approved Bank Affiliate shall be of all, but not less than all, of the Loans, the Commitment and the other rights and obligations of such Bank hereunder. Upon execution of a Notice of Assignment and Acceptance by such Eligible Assignee in which it agrees to abide by all of the terms, conditions and obligations applicable to a Bank herein and to have a Commitment as specified in such agreement, such Eligible Assignee shall be deemed a Bank hereunder to the same extent as if it were a signatory hereto and, thereafter, such Eligible Assignee shall for all purposes be considered a "Bank" hereunder. Administrative Agent shall be entitled to a $2,500 processing fee, payable by the assignor, with respect to any such assignment by a Bank. (b) Subject to Section 11.16, Borrower authorizes each Bank and the Arranger to disclose to any prospective assignee and assignee any and all information in such Bank's or the Arranger's possession concerning Borrower, this Agreement and any collateral. (c) Notwithstanding anything to the contrary contained herein, any Bank (a "Granting Bank") may grant to a special purpose funding vehicle (an "SPC"), ------------- --- identified as such in writing from time to time by the Granting Bank to Administrative Agent and Borrower, the option to -37- provide to Borrower all or any part of any Loan that such Granting Bank would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to - -------- make any Loan, (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Bank shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Bank to the same extent, and as if, such Loan were made by such Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Bank). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section, any SPC may (i) with notice to, but without the prior written consent of, Borrower and Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Bank or to any financial institutions (consented to by Borrower and Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) subject to the provisions of Section 11.16 hereof, disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. This section may not be amended without the written consent of the SPC. 11.12 Obligations Several. The obligations of each Bank under this ------------------- Agreement are several. Neither Administrative Agent nor any Bank shall be liable for the failure of any other Bank to perform its obligations under this Agreement. 11.13 Participations. Any Bank may at any time sell, or grant -------------- participations in all or part of its Commitment or any Loan or Loans made to Borrower under this Agreement to any other Person, other than an individual, (a "Participant"); provided, however, no Bank may be relieved of its obligations under this Agreement except with the consent of Borrower and Administrative Agent. Any such sale or grant of a participation is subject to the following conditions: (a) Administrative Agent and Borrower may, for all purposes of this Agreement, deem and treat a Bank party to this Agreement as the owner of such Bank's Loans hereunder for all purposes hereof until a written notice of the sale or participation shall have been received by Administrative Agent, together with Borrower's consent to treat such Participant as owner of such Loan. (b) Subject to Section 11.16, Borrower authorizes each Bank and the Administrative Agent to disclose to any prospective Participant and to any Participant any and all information in such Bank's or the Administrative Agent's possession concerning Borrower, this Agreement and any collateral. -38- (c) Any agreement pursuant to which a Bank grants a participation in its rights with respect to any Loan or Loans shall provide that, with respect to any such Loan or Loans, such Bank shall retain the sole right and responsibility to exercise the rights of a Bank under this Agreement including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement and the right to take action to declare any amount due and payable pursuant to Section 9; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement without the consent of the Participant if such modification, amendment or waiver would (i) increase the amount of the Total Commitment or change the Commitment of such Bank, (ii) reduce interest, principal or fees owing to such Bank hereunder, (iii) extend the fixed date on which any sum is due hereunder, or (iv) release or subordinate any collateral. (d) Except as provided in this Section 11.13, no recipient of a participation in a Loan or Loans of any Bank shall have any rights under this Agreement other than to receive payment of principal of, and interest on the Loans and of such other amounts as Banks are entitled to receive pursuant to Sections 3.1, 3.2, 3.3, and 3.4 of this Agreement; provided, however such recipients shall be entitled to receive pursuant to Sections 3.1, 3.2 and 3.3 only the lesser of (i) the amount that the Bank from which the recipient received its participation would have received had such Bank not transferred an interest in its Loans to such recipient and (ii) the additional costs actually incurred by such recipient; and any demand by a Participant for payment hereunder shall certify that the amount demanded does not exceed the amount Participant is entitled to receive under this subsection (d). (e) Notwithstanding any other provision set forth in this Agreement, any Bank may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Loans owing to it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. 11.14 Fees and Expenses. Borrower agrees to pay on demand (a) to ----------------- Administrative Agent all reasonable costs, expenses and attorneys' fees (including allocated costs for in-house legal services) incurred by Administrative Agent in connection with the preparation and administration of this Agreement and any documents including any amendments, waivers, or other modifications and (b) all reasonable costs, expenses and attorneys' fees (including allocated costs for in-house legal services) incurred by Administrative Agent and Banks in connection with the enforcement of this Agreement and any instrument or agreement required hereunder and in connection with any refinancing or restructuring of the Loans in the nature of a "work- out"; provided, however that, in addition to costs of Administrative Agent's in- house counsel, Borrower shall be obligated to pay for the costs of no more than one counsel for Administrative Agent and all Banks (without prejudice to any Bank's right to engage additional counsel at its own cost and expense) unless any Bank shall in good faith reasonably determine that there is a conflict of interest that causes it to be reasonably necessary for such Bank to be represented by separate counsel. 11.15 Indemnity. Borrower agrees to indemnify the Administrative Agent, the --------- Arranger the Syndication Agent, the Documentation Agents, each Bank and their respective directors, officers, agents and employees (collectively, the "Indemnitees") from and hold each of them -39- harmless against any and all losses, liabilities, claims, damages or expenses reasonably incurred by any of them arising out of or by reason of any investigation by governmental or judicial authorities or being made a party to any litigation or other similar proceeding related to any use made or proposed to be made by Borrower of the proceeds of any Loan for the acquisition of any other Person including, without limitation, the reasonable fees and disbursements of counsel (including allocated costs for in-house legal services) incurred in connection with any such investigation, litigation or other proceeding; provided, however, that Borrower shall have no obligation to -------- ------- indemnify or pay for the costs and expenses of more than one counsel for the Indemnitees, unless any Indemnitee shall in good faith reasonably determine that there is a conflict of interest that causes it to be reasonably necessary for any Indemnitees to be represented by other counsel. Counsel chosen to represent the any Indemnitee pursuant to the previous sentence shall be reasonably satisfactory to Borrower. The obligations of Borrower under this Section shall survive the termination of this Agreement. 11.16 Confidentiality. In consideration of Borrower furnishing Confidential --------------- Information(as defined below) to the Banks, the Arranger, the Administrative Agent, the Syndication Agent and the Documentation Agents, (collectively, the "Recipients") and their respective directors, officers and employees (collectively, the "Representatives"), each Recipient agrees for itself that: (a) Such Recipient shall keep the Confidential Information confidential and shall not, without Borrower's prior written consent, disclose it in any manner whatsoever, in whole or in part, and shall not use the Confidential Information other than in connection with this Agreement. Each Recipient agrees to reveal the Confidential Information only to its Representatives, bank affiliates, auditors, counsel and other advisors, representatives or agents who need to know the Confidential Information for the purpose of this Agreement, who are informed by such Recipient of the confidential nature of the Confidential Information and who shall agree to act in accordance with the terms and conditions of this section. Each Recipient shall be responsible for any breach of this Section by its Representatives. (b) Without Borrower's prior written consent, no Recipient shall disclose to any Person the fact that the Confidential Information has been made available, that such Recipient is entering into this Agreement, or any other facts with respect to this Agreement. (c) Upon payment in full of all obligations owing to a Recipient and termination of such Recipient's Commitments, if any, hereunder, copies of the Confidential Information shall be returned to Borrower immediately upon its request, except for that portion of the information which consists of analyses, compilations, forecasts, studies or other documents prepared by a Recipient or its Representatives based on Confidential Information, which portion shall either be destroyed (as evidenced by a certificate of destruction signed by a duly authorized offer of such Recipient) or held by such Recipient and kept confidential and subject to the terms of this section; provided that such -------- Recipient shall not be required to return or destroy Confidential Information to the extent such Recipient reasonably determines that its retention of such Confidential Information is required by applicable law or regulation. Any oral Confidential Information shall continue to be subject to the terms of this Section. -40- (d) Confidential Information shall not include such portions of the information furnished to a Recipient which (i) are or become generally available to the public other than as a result of a disclosure by such Recipient or its Representatives in violation of this Agreement, (ii) become available to such Recipient on a non-confidential basis from a source (other than Borrower or its Representatives) which is not known by such Recipient to be prohibited from disclosing such information to such Recipient, or (iii) were in such Recipient's possession prior to being furnished to such Recipient or its Representatives provided that the source of such information was not known by such Recipient to be prohibited from disclosing the information to such Recipient. (e) Except as otherwise expressly set forth in this Agreement. each Recipient acknowledges that neither Borrower nor any of its Representatives makes any express or implied representation or warranty as to the accuracy or completeness of the information furnished to such Recipient, and that neither Borrower nor any of its Representatives shall have any liability resulting from the use of the information furnished to any Recipient, errors therein or omissions therefrom. (f) In the event any Recipient or any person to whom it transmits the Confidential Information pursuant to this Agreement becomes legally compelled to disclose any of the information, such Recipient shall, to the extent permitted by law, provide Borrower with prompt written notice thereof so that the Borrower may seek a protective order or other appropriate remedy and/or waiver such Recipient's compliance with the provisions of this section, In the event that such protective order or other remedy is not obtained, or that Borrower waives any Recipient's compliance with the provisions of this section, such Recipient may furnish only that portion of the Confidential Information which it is advised by written opinion of counsel that the disclosure thereof is legally required, and shall exercise its best efforts to obtain reliable assurance that confidential treatment will be accorded the Confidential Information so disclosed. (g) Notwithstanding the foregoing, a Recipient may (i) disclose any Confidential Information to bank examiners; (ii) use any Confidential Information in connection with the management, supervision and enforcement of this Agreement, including the enforcement of such Recipient's rights under any agreement executed in connection therewith; (iii) disclose any Confidential Information in connection with any litigation or dispute involving any such Person or the Borrower and related to this Agreement or to any use of proceeds of the Loans; (iv) disclose any Confidential Information to other Recipients; and (v) disclose Confidential Information to prospective assignees and Participants and assignees and Participants pursuant to Sections 3.8, 11.11(b) and 11.13(b); provided, further, that in each of the foregoing cases, such Person shall use its best efforts to ensure that any such disclosure will be made under procedures reasonably calculated to maintain the confidentiality of such Confidential Information. For purposes of this Section, "Confidential Information" means information relating to the business, operation or technology of Borrower or its affiliates which Borrower has furnished to the Banks, the Arranger, the Administrative Agent, the Syndication Agent, the Documentation Agents or their Representatives which is either non-public, confidential or proprietary in nature, together with copies and other reproductions thereof, and analyses, compilations, forecasts, studies or other documents prepared by any Banks or its Representatives which contain or -41- otherwise reflect such information. This section shall survive termination of the Agreement. 11.17 Termination of Existing Agreements. The parties hereto agree that, ---------------------------------- effective as of the Effective Date, the Existing Agreements, and the commitments thereunder, are terminated and no party has any outstanding obligations thereunder. 11.18 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY -------------------------------- EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. -42- IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto in Los Angeles, California as of the date first hereinabove written. HUGHES ELECTRONICS CORPORATION By:_______________________________ Name: Title: S-1 BANK OF AMERICA, N.A., as Administrative Agent By:________________________________ Name: Title: S-2 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Syndication Agent and a Bank By:________________________________ Name: Title: S-3 CITICORP USA, INC., as Documentation Agent and a Bank By:__________________________________ Name: Title: S-4 THE CHASE MANHATTAN BANK, as Documentation Agent and a Bank By:_____________________________ Name: Title: S-5 BANK OF AMERICA, N.A., as a Bank By:_______________________________ Name: Title: S-6 BANKERS TRUST COMPANY By:_____________________________ Name: Title: S-7 CREDIT SUISSE FIRST BOSTON By:___________________________ Name: Title: By:___________________________ Name: Title: S-8 THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY By:___________________________ Name: Title: S-9 THE MITSUBISHI TRUST & BANKING CORPORATION, NEW YORK BRANCH By:___________________________ Name: Title: S-10 NATIONSBANK OF TEXAS, N.A. By:___________________________ Name: Title: S-11 TORONTO-DOMINION (TEXAS), INC. By:___________________________ Name: Title: S-12 BANCA DI ROMA - SAN FRANCISCO BRANCH By:___________________________ Name: Title: By:___________________________ Name: Title: S-13 THE BANK OF NEW YORK By:___________________________ Name: Title: S-14 CIBC INC. By:______________________________ Name: Title: S-15 CREDIT LYONNAIS NEW YORK BRANCH By:______________________________ Name: Title: S-16 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES By:______________________________ Name: Title: By:______________________________ Name: Title: S-17 BANK ONE, N.A. By:______________________________ Name: Title: S-18 ALLFIRST BANK By:______________________________ Name: Title: S-19 THE FUJI BANK, LIMITED LOS ANGELES AGENCY By:______________________________ Name: Title: S-20 THE INDUSTRIAL BANK OF JAPAN, LIMITED LOS ANGELES AGENCY By:______________________________ Name: Title: S-21 ISTITUTO BANCARIO SAN PAOLO DI TORINO SpA By:______________________________ Name: Title: By:______________________________ Name: Title: S-22 UNION BANK OF CALIFORNIA, N.A. By:______________________________ Name: Title: S-23 SCHEDULE 1 BANKS AND COMMITMENTS
Bank Commitment Normal Percentage - ---- ---------- ----------------- Bank of America, N.A. $ 90,000,000 12.0000% Allfirst Bank $ 26,250,000 3.5000% Banca di Roma--San Francisco $ 36,250,000 4.8333% Bank Hapoalim $ 7,500,000 1.0000% Bank of New York $ 26,250,000 3.5000% Bank One $ 26,250,000 3.5000% Chase Manhattan Bank $ 52,500,000 7.0000% CIBC Oppenheimer $ 26,250,000 3.5000% Citicorp USA $ 52,500,000 7.0000% Credit Lyonnais $ 26,250,000 3.5000% Credit Suisse First Boston $ 37,500,000 5.0000% Deutsche Bank AG $ 63,750,000 8.5000% Fuji Bank, Ltd. $ 26,250,000 3.5000% Industrial Bank of Japan $ 26,250,000 3.5000% Mercantile Bank $ 20,000,000 2.6667% Mitsubishi Trust and Banking $ 37,500,000 5.0000% Corporation Morgan Guaranty Trust $ 52,500,000 7.0000% Sanpaolo IMI SpA $ 26,250,000 3.5000% Toronto Dominion Bank $ 37,500,000 5.0000%
-1- Union Bank of California $ 26,250,000 3.5000% Westdeutsche Landesbank $ 26,250,000 3.5000% Total $750,000,000 100.0000%
-2- EXHIBIT A-1 LOAN REQUEST TO: Bank of America, N.A., as Administrative Agent for Banks FROM: Hughes Electronics Corporation DATE: RE: Hughes Electronics Corporation - Revolving Credit Agreement (Multi-Year Facility) Gentlemen: 1. We refer to the Amended and Restated Revolving Credit Agreement (Multi-Year Facility) dated as of November 24, 1999 and made among Hughes Electronics Corporation, the banks parties thereto ("Banks"), Bank of America, N.A., as administrative agent for the Banks (in such capacity "Administrative Agent"), Morgan Guaranty Trust Company of New York, as Syndication Agent and Citicorp USA, Inc. and The Chase Manhattan Bank as Documentation Agents (the "Agreement"). Terms defined in the Agreement shall have the same meaning herein. 2. We hereby request that a [Base Rate Loan] [Eurodollar Loan] is made to us as follows: (i) Principal Amount: (ii) Borrowing Date: (iii) Interest Period (if a Eurodollar Loan): 3. For the purposes of inducing the Banks to make the Loan requested herein, we confirm that, pursuant to Section 5.2 of the Agreement, as of the date hereof: (i) to the best of the knowledge of the undersigned, the representations and warranties set out in Section 6 of the Agreement (with the exception of Section 6.6) are true and correct in all material respects; (ii) the most current financial statements delivered pursuant to Section 7.5 of the Agreement present fairly the financial position and results of operation and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such A-1-1 LOAN REQUEST statements relate as of the date thereof (subject, in the case of unaudited financial statements, to year end adjustments); and (iii) to the best of the knowledge of the undersigned, no Event of Default or Unmatured Event of Default has occurred and is continuing. HUGHES ELECTRONICS CORPORATION By: ___________________________________ Name: Title: A-1-2 LOAN REQUEST EXHIBIT A-2 LOAN REQUEST - BID RATE LOANS TO: Bank of America, N.A., as Administrative Agent for Banks FROM: Hughes Electronics Corporation DATE: RE: Hughes Electronics Corporation - Revolving Credit Agreement (Multi-Year Facility) Gentlemen: 1. We refer to the Amended and Restated Revolving Credit Agreement (Multi-Year Facility) dated as of November 24, 1999 and made among Hughes Electronics Corporation, the banks parties thereto ("Banks"), Bank of America, N.A., as administrative agent for the Banks (in such capacity "Administrative Agent"), Morgan Guaranty Trust Company of New York, as Syndication Agent and Citicorp USA, Inc. and The Chase Manhattan Bank as Documentation Agents (the "Agreement"). Terms defined in the Agreement shall have the same meaning herein. 2. We hereby give you notice pursuant to Section 2.4 of the Revolving Credit Agreement that we request offers for the following proposed Bid Rate Loans: (i) Borrowing Date: (ii) Principal Amount: (iii) Interest Period(s): Each Bid Rate Loan offer should specify an amount, the Interest Period and the Bid Rate upon which each Bank desires to advance a Bid Rate Loan. 3. For the purposes of inducing the Banks to make the Loan requested herein, we confirm that, pursuant to Section 5.2 of the Agreement, as of the date hereof: (i) to the best of the knowledge of the undersigned, the representations and warranties set out in Section 6 of the Agreement (with the exception of Section 6.6) are true and correct in all material respects; (ii) the most current financial statements delivered pursuant to Section 7.5 of the Agreement present fairly the financial position and results of operation A-2-1 LOAN REQUEST - BID RATE LOANS and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such statements relate as of the date thereof (subject, in the case of unaudited financial statements, to year end adjustments); and (iii) to the best of the knowledge of the undersigned, no Event of Default or Unmatured Event of Default has occurred and is continuing. HUGHES ELECTRONICS CORPORATION By: __________________________________ Name: Title: A-2-2 LOAN REQUEST - BID RATE LOANS EXHIBIT B MASTER BID RATE NOTE Los Angeles, California December 5, 1997 HUGHES ELECTRONICS CORPORATION, a Delaware corporation (formerly named Hughes Network Systems, Inc.) (the "Borrower"), for value received, hereby promises to pay to the order of ________________________ (the "Bank"), at Agency Administrative Services #5693 of Bank of America National Trust and Savings Association, as Administrative Agent, for the account of Bank, 1850 Gateway Blvd., Concord, California 94520, on the dates specified in the Credit Agreement (as herein defined), in lawful money of the United States, the total unpaid principal amount of all Bid Rate Loans made by Bank to Borrower from the date of this Note through the Termination Date pursuant to the Credit Agreement. This Note shall bear interest as set forth in the Credit Agreement for Bid Rate Loans. Interest payable under this Note shall be payable at the times specified in the Credit Agreement. No Loan shall be made under this Note if, as a result of such Loan, the total aggregate principal amount of Loans outstanding under the Credit Agreement exceeds the Total Commitment. This Note is one of the Master Bid Rate Notes referred to in the Revolving Credit Agreement (Multi-Year Facility) dated as of December 5, 1997 (as in effect from time to time, the "Credit Agreement"), among Borrower, the banks parties thereto ("Banks"), Bank of America National Trust and Savings Association, as administrative agent for the Banks (in such capacity "Administrative Agent"), Morgan Guaranty Trust Company of New York, as Syndication Agent and Citicorp USA, Inc. and The Chase Manhattan Bank as Documentation Agents, and is subject to prepayment in whole or in part and its maturity is subject to acceleration upon the terms provided in the Credit Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of California. All Bid Rate Loans made by Bank to Borrower pursuant to the Credit Agreement and all payments of principal thereof may be indicated by Bank upon the grid attached hereto which is a part of this Note. Such notations shall be presumptively correct as to the aggregate unpaid principal amount of all Bid Rate Loans made by Bank pursuant to the Credit Agreement. HUGHES ELECTRONICS CORPORATION By: _____________________________ Title: __________________________ B-1 MASTER BID RATE NOTE Bid Rate Loans and Payments of Principal
- -------------------------------------------------------------------------------------------------------------- Unpaid Amount of Interest Interest Amount of Principal Name of Person Date Loan Period Rate Principal Paid Balance Marking Notation - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------
B-2 MASTER BID RATE NOTE EXHIBIT C RELATIONS AMONG THE BANKS AND AGENTS 1. Administration of the Credit. Payment of interest and principal on ---------------------------- the Loans and the facility fee and all other amounts payable by Borrower hereunder shall be made by Borrower in immediately available funds, directly to each Bank in the case of amounts payable under Sections 3.1, 3.2 and 3.3 and, in all other cases, to Administrative Agent, and Administrative Agent shall promptly distribute to the other Banks in immediately available funds their shares of principal, interest and fees and to each Bank as provided herein such other amounts as paid by Borrower. 2. Pro Rata Distribution. All facility fees will be divided among the --------------------- Banks in accordance with their Normal Percentage, and interest and principal payments on each Loan will be divided pro rata among Banks in accordance with their percentage interest in the Loan. 3. Right of Setoff. Any Bank which shall receive payment of or on --------------- account of all or part of its share of the Loans through the exercise of any right of setoff, counterclaim, or banker's lien, or otherwise in a greater proportion than the proportionate amount of principal and interest due it under this Agreement immediately prior to such payment shall purchase a ratable proportion of the portions of the Loan held by the other Banks so that all recoveries of principal and interest shall be shared by the Banks in accordance with their pro rata interests in the Loans outstanding hereunder. If all or any portion of such excess payment is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Any sum received by Bank through exercise of the right of setoff, counterclaim, or banker's lien shall be deemed to be first applied to such Bank's portion of the indebtedness under this Agreement, second as herein above provided and any balance remaining thereafter shall be deemed applied to any other indebtedness of Borrower to such Bank. 4. Notice of Event of Default. Upon receipt by Administrative Agent from -------------------------- Borrower of any communication calling for an action on the part of Banks, or upon notice to Administrative Agent of an Unmatured Event of Default or an Event of Default, it will in turn promptly inform the other Banks in writing of the nature of such communication or of the Unmatured Event of Default or Event of Default, as the case may be. 5. Actions by Administrative Agent. Upon any occasion requiring or ------------------------------- permitting an approval, consent, election or other action on the part of Banks, action shall be taken by Administrative Agent for and on behalf or for the benefit of all Banks upon the direction of the required number of Banks and the Administrative Agent, if applicable, as set forth in Section 11.1 of the Agreement. 6. Several Liability of Banks. The obligation of each Bank hereunder is -------------------------- several, and the failure of one Bank to perform hereunder shall in no way relieve the other Banks from performance. 7. Liability of Administrative Agent. Administrative Agent shall not be --------------------------------- liable or answerable for anything whatsoever in connection with this Agreement except for its willful C-1 RELATIONS AMONG THE BANKS AND THE AGENT misconduct or gross negligence, and Administrative Agent shall have no duties or obligations other than as provided herein. Administrative Agent shall be entitled to rely on any opinion of counsel (including counsel for Borrower) in relation to this Agreement, and upon statements and communications received from Borrower, or from any other person, believed by it to be authentic, and shall not be liable for any action taken or omitted in good faith on such reliance. 8. Indemnification of Administrative Agent. Each Bank agrees to --------------------------------------- indemnify Administrative Agent (to the extent not reimbursed by Borrower and without limiting the obligation of Borrower to do so), ratably according to its Normal Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by Administrative Agent under this Agreement except for Administrative Agent's gross negligence or willful misconduct. The obligations of the Banks under this Section 8 shall survive termination of the Agreement. 9. Rights of Administrative Agent as Bank. With respect to its -------------------------------------- obligation to lend under this Agreement and the Loans made by it, Bank of America shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not Administrative Agent; and the term "Banks" shall include Bank of America in its individual capacity. Bank of America may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with Borrower as if it were not Administrative Agent. 10. Assignment by Bank of its Obligations. Administrative Agent may deem -------------------------------------- and treat a Bank party to this Agreement as the owner of such Bank's portion of the Loans for all purposes hereof unless and until a written notice of the assignment or transfer of such Bank's obligations otherwise permitted under the Agreement executed by such Bank shall have been received by Administrative Agent, together with Borrower's consent to such assignment or transfer and such other documentation from such Bank and its assignee or transferee as Administrative Agent may reasonably request. 11. Representations by Banks. Neither Administrative Agent nor any Bank ------------------------ has made or makes to any other Bank any representation, and neither Administrative Agent nor any Bank assumes any responsibility, in respect to the execution, construction or enforcement of this Agreement or any other instrument or agreement executed by Borrower or by any other person or entity. 12. Independent Investigation by Banks. Each Bank has made and shall ---------------------------------- continue to make its own independent investigation of the financial condition and affairs of Borrower in connection with the making and the continuance of the Loans and has made and covenants that it shall continue to make its own appraisal of the creditworthiness of Borrower. Each Bank agrees Administrative Agent has no duty or responsibility, either initially or on a continuing basis, to provide any Bank with any credit or other information with respect to Borrower, whether coming into its possession before the making of the Loans or at any time or times thereafter except as expressly provided in this Agreement. C-2 RELATIONS AMONG THE BANKS AND THE AGENT 13. Successor Administrative Agent. Administrative Agent shall have the ------------------------------ right, at any time, to resign as Administrative Agent for the Banks hereunder. Such resignation shall not be effective until a successor Administrative Agent chosen by Majority Banks, and accepted by Borrower, shall accept appointment as Administrative Agent for the Banks hereunder. If no successor Administrative Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment, within 30 days after the retiring Administrative Agent has given notice of resignation, the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent reasonably acceptable to Borrower, which successor Administrative Agent shall be a commercial bank organized under the laws of the United States of America or a State thereof having a combined capital and surplus of at least $100,000,000. Upon the acceptance by the successor Administrative Agent of its appointment hereunder, the successor Administrative Agent shall succeed to and become vested with all the rights and obligations of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its obligations under this Agreement. The provisions of this Article shall inure to the benefit of the retiring Administrative Agent as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Exhibit C and Section 11.14 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. 14. Syndication Agent; Documentation Agents. None of the Banks identified --------------------------------------- on the facing page or signature pages of this Agreement as Syndication Agent or Documentation Agents shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Banks as such. Without limiting the foregoing, none of the Banks so identified shall have or be deemed to have any fiduciary relationship with any Bank. Each Bank acknowledges that it has not relied, and will not rely, on any of the Banks so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. C-3 RELATIONS AMONG THE BANKS AND THE AGENT EXHIBIT D LENDING OFFICES OF BANKS AND ADDRESSES FOR NOTICES BORROWER 200 North Sepulveda Blvd. P.O. Box 956 ES, 001, A148 El Segundo, CA 90245-0956 BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT Bank of America N.A. Mail Code: CA9-706-11-03 555 South Flower Street, 11th Floor Los Angeles, California 90071 Attention: Gina Meador Vice President Agency Management-Los Angeles Telephone: (213) 228-5245 Facsimile: (213) 228-2299 Administrative Agent's Payment Office: -------------------------------------- Bank of America N.A. Mail Code: CA4-706-05-09 1850 Gateway Boulevard, Fifth Floor Concord, California 94520 Attention: Glenis Croucher Assistant Vice President Agency Administrative Services West Telephone: (925) 675-8447 Facsimile: (925) 675-8500 D-1 BANK OF AMERICA, N.A., AS A BANK Domestic and Offshore Lending Office: ------------------------------------- Bank of America N.A. Mail Code: CA4-706-05-09 Agency Administrative Services-West 1850 Gateway Blvd., 5th Floor Concord, CA 94520 Attention: Glenis Croucher Sr. Account Administrator Telephone: (925) 675-8447 Facsimile: (925) 969-2807 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ----------------------- Bank of America N.A. Mail Code: CA9-706-11-07 555 South Flower Street, 11th Floor Los Angeles, California 90071 Attention: Dianne J. Prust Vice President Credit Products Aerospace/Defense #9848 Telephone: (213) 228-2435 Facsimile: (213) 623-1959 ALLFIRST BANK Domestic and Offshore Lending Office: ------------------------------------- Allfirst Bank 25 S. Charles Street 18/th/ Floor Baltimore, MD 21201 Attention: Jennifer Erickson Vice President Telephone: (410) 244-4721 Facsimile: (410) 244-4239 Email: Jennifer.g.Erickson@allfirst.com D-2 BANCA DI ROMA--SAN FRANCISCO Domestic and Offshore Lending Office: ------------------------------------- BANCA DI ROMA--San Francisco One Market Steuart Tower, Suite 1000 San Francisco, CA 94105 Attention: Ms. Cecilia Gin Telephone: (415) 977-7321 Facsimile: (415) 357-9869 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ BANCA DI ROMA--San Francisco One Market Steuart Tower, Suite 1000 San Francisco, CA 94105 Attention: Mr. Eric Maubert Assistant Vice President Telephone: (415) 977-7315 Facsimile: (415) 357-9869 D-3 THE BANK OF NEW YORK Domestic and Offshore Lending Office: ------------------------------------- The Bank of New York One Wall Street, 22/nd/ floor New York, NY 10005 Attention: Dawn Hertling Telephone: (212) 635-6742 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ The Bank of New York 10990 Wilshire Blvd. Suite 1125 Los Angeles, CA 90024 Attention: Jonathan Rollins Telephone: (310) 996-8658 Facsimile: (310) 996-8667 Email: jrollins@bankofny.com D-4 BANK HAPOALIM B.M. Domestic and Offshore Lending Office: ------------------------------------- Bank of New York 48 Wall Street New York, NY 10286 Attention: Marc Bosc Vice President Telephone: (212) 782-2181 Facsimile: (212) 782-2187 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------ Bank Hapoalim 1177 Avenue of the Americas New York, NY 10036-2790 Attention: Marc Bosc Vice President Telephone: (212) 782-2181 Facsimile: (212) 782-2187 D-5 BANK ONE, NA Domestic and Offshore Lending Office: ------------------------------------- Bank One, NA 1 Bank One Plaza 10/th/ Floor Chicago, IL 60670 Attention: Sharon Bosch Telephone: (312) 732-7112 Facsimile: (312) 732-4840 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- Bank One, NA 777 South Figueroa 4/th/ Floor Los Angeles, CA 90017 Attention: Anthony Mathews Senior Vice President Telephone: (213) 683-4957 Facsimile: (213) 683-4999 Email: anthony_mathews@em.fcnbd.com THE CHASE MANHATTAN BANK Domestic and Offshore Lending Office: ------------------------------------- The Chase Manhattan Bank 270 Park Avenue New York, New York 10017 Attention: Lenora Kiernan Telephone: (212) 552-7309 Facsimile: (212) 552-5650 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- The Chase Manhattan Bank 270 Park Avenue New York, New York 10017 Attention: Richard C. Smith Vice President Telephone: (212) 270-5435 Facsimile: (213) 270-5100 D-6 CIBC, INC. Domestic and Offshore Lending Office: ------------------------------------- CIBC, Inc. 2727 Park Ferry Road, Suite 1200 Atlanta, Georgia 30339 Attention: Vickie Rollins Telephone: (770) 319-4802 Facsimile: (770) 319-4950 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- CIBC, Inc. 425 S. Lexington Avenue New York, New York 10017 Attention: Laura Hom Telephone: (212) 856-3985 Facsimile: (212) 856-3985 CITICORP USA, INC. Domestic and Offshore Lending Office: ------------------------------------- Citicorp, USA, Inc. 399 Park Ave. New York, NY 10043 Attention: Alyssa Kawalek Loan Administrator Telephone: (302) 894-6055 Facsimile: (302) 894-6120 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- Citicorp USA, Inc. 787 West 5th Street 29th Floor Los Angeles, CA 90071 Attention: Walter Larsen Telephone: (213) 239-1501 Facsimile: (213) 623-3592 D-7 CREDIT LYONNAIS NEW YORK BRANCH Domestic and Offshore Lending Office: ------------------------------------- Credit Lyonnais New York Branch 1301 Avenue of the Americas New York, New York 10019 Attention: Deborah Sachs Telephone: (212) 261-7837 Facsimile: (212) 261-3318 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- Credit Lyonnais New York Branch 1301 Avenue of the Americas New York, New York 10019 Attention: Mark Campellare Telephone: (212) 261-7306 Facsimile: (212) 261-3288 CREDIT SUISSE FIRST BOSTON Domestic and Offshore Lending Office: ------------------------------------- Credit Suisse First Boston 11 Madison Avenue New York, NY 10010-3629 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- Credit Suisse First Boston 11 Madison Avenue New York, NY 10010-3629 Primary Contact --------------- David Kratovil Director Telephone: (212) 325-9155 Facsimile: (212) 325-8615 Email: david.kratovil@csfb.com Back-Up Contact --------------- Janko Gogolja Telephone: (212) 325-0699 Facsimile: (212) 325-8319 D-8 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES Domestic and Offshore Lending Office: ------------------------------------- Deutsche Bank AG 31 West 52/nd/ Street New York, NY 10019 Attention: Noble Samuel/Cheryl H. Mandelbaum Telephone: (212) 469-4091 Facsimile: (212) 469-4139 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- Deutsche Bank AG 31 West 52/nd/ Street New York, NY 10019 Attention: Joel Makowsky Vice President Telephone: (212) 469-7896 Facsimile: (212) 469-4604 D-9 THE FUJI BANK, LIMITED Domestic and Offshore Lending Office: ------------------------------------- The Fuji Bank 333 South Hope Street 39/th/ Floor Los Angeles, CA 90071 Attention: Wayne Wong Associate Telephone: (213) 253-4132 Facsimile: (213) 253-4178 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- The Fuji Bank 333 South Hope Street 39/th/ Floor Los Angeles, CA 90071 Attention: Jon Bigelow Vice President Telephone: (213) 253-4144 Facsimile: (213) 253-4178 Email: fbklal4@pacbell.net D-10 THE INDUSTRIAL BANK OF JAPAN, LIMITED LOS ANGELES AGENCY Domestic and Offshore Lending Office: ------------------------------------- The Industrial Bank of Japan, Limited New York Branch 1251 Avenue of the Americas New York, NY 10020-1104 Attention: Patel Umesh/Richard Emmich Telephone: (212) 282-4085 Facsimile: (212) 282-4480 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- The Industrial Bank of Japan, Limited Los Angeles Agency 350 South Grand Avenue, Suite 1500 Los Angeles, CA 90071 Attention: Joan M. Farrell Telephone: (213) 893-6443 Facsimile: (213) 488-9840 SANPAULO IMI SpA Domestic and Offshore Lending Office: ------------------------------------- Sanpaolo IMI Bank 245 Park Avenue New York, New York 10167 Attention: Carmela Romanello-Schaden Telephone: (212) 692-3126 Facsimile: (212) 629-3178 Notices (other than Borrowing notices and Notices of: ----------------------------------------------------- Conversion/Continuation): Sanpaolo IMI Bank 444 South Flower Street, Suite 4550 Los Angeles, California 90071 Attention: Donald Brown Telephone: (213) 489-3105 Facsimile: (213) 622-2514 D-11 MERCANTILE BANK, NATIONAL ASSOCIATION Domestic and Offshore Lending Office: ------------------------------------- Mercantile Bank, National Association Capital Markets Division Tram 12-3 One Mercantile Center St. Louis, MO 63101-1643 Attention: Sharon Dent Senior Commercial Loan Assistant Telephone: (314) 418-2396 Facsimile: (314) 418-3571 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- Mercantile Bank, National Association Capital Markets Division Tram 12-3 One Mercantile Center St. Louis, MO 63101-1643 Attention: Kirk A. Porter Vice President, Division Manager Telephone: (314) 418-2413 Facsimile: (314) 418-3571 D-12 THE MITSUBISHI TRUST AND BANKING CORPORATION Domestic and Offshore Lending Office: ------------------------------------- The Mitsubishi Trust and Banking Corporation 520 Madison Avenue New York, NY 10022 Attention: Loan Administration Department Telephone: (212) 891-8262 Facsimile: (212) 755-2349 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- The Mitsubishi Trust and Banking Corporation 520 Madison Avenue New York, NY 10022 Attention: Susan Lau Vice President Telephone: (212) 891-8419 Facsimile: (212) 644-6825 (direct) (212) 755-2349 (central) D-13 MORGAN GUARANTY TRUST COMPANY OF NEW YORK Domestic Lending Office ----------------------- Morgan Guaranty Trust Company of New York 60 Wall Street New York, NY 10260-0060 Execution Copies to: ------------------- Jeannie Mattson Associate Morgan Guaranty Trust Company of New York c/o J.P. Morgan Services, Inc. 500 Stanton Christiana Road 3/OPS2 Newark, DE 19713-2107 Conformed Copies to: ------------------- Robert Bottamedi Vice President Morgan Guaranty Trust Company of New York 60 Wall Street New York, NY 10260-0060 Offshore Lending Office ------------------------ Morgan Guaranty Trust Company of New York Euro-Loan Servicing Department c/o J.P. Morgan Services, Inc. 500 Stanton Christiana Road Newark, DE 19713-2107 Execution Copies to: ------------------- Jeannie Mattson Associate Morgan Guaranty Trust Company of New York c/o J.P. Morgan Services, Inc. 500 Stanton Christiana Road 3/OPS2 Newark, DE 19713-2107 D-14 Conformed Copies to: ------------------- Robert Bottamedi Vice President Morgan Guaranty Trust Company of New York 60 Wall Street New York, NY 10260-0060 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- JP Morgan Securities Inc 60 Wall Street 5/th/ Floor New York, NY 10260-0060 Attention: Robert Bottamedi Vice President Telephone: (212) 648-1349 Facsimile: (212) 648-5018 D-15 THE TORONTO-DOMINION BANK Domestic and Eurodollar Lending Office: --------------------------------------- The Toronto-Dominion Bank 909 Fanin, Suite 1700 Houston, Texas 77010 Attention: Jorge A. Garcia Manager - Credit Administration Telephone: (713) 653-8242 Facsimile: (713) 951-9921 Full Money Market Lending Office: --------------------------------- The Toronto-Dominion Bank 31 West 52/nd/ Street, 21/st/ Floor New York, New York 10019-6101 Attention: Senior Dealer Telephone: (212) 468-0400 Facsimile: (212) 974-5283 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- The Toronto-Dominion Bank 31 West 52/nd/ Street, 21/st/ Floor New York, New York 10019-6101 Attention: Michael Bandziere Telephone: (212) 468-0713 Facsimile: (212) 262-1928 D-16 UNION BANK OF CALIFORNIA, N.A. Domestic and Offshore Lending Office: ------------------------------------- Union Bank of California, N.A. 445 S. Figueroa Street, 16/th/ Floor Los Angeles, California 90071 Attention: Gohar Karapetyan Telephone: (213) 720-2679 Facsimile: (213) 724-6198 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- Union Bank of California, N.A. 445 S. Figueroa Street, 16/th/ Floor Los Angeles, California 90071 Attention: Scott Jessup Vice President Telephone: (213) 236-4023 Facsimile: (213) 236-7814 D-17 WESTDEUTSCHE LANDESBANK GIROZENTRALE Domestic and Offshore Lending Office: ------------------------------------- Westdeutsche Landesbank Girozentrale, New York Branch 1211 Avenue of the Americas New York, NY 10036 Attention: Philip Green Vice President Telephone: (212) 852-6113 Facsimile: (212) 302-7946 Email: philip_green@westlb.com Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- Westdeutsche Landesbank Girozentrale, New York Branch 1211 Avenue of the Americas New York, NY 10036 Attention: Barry Wadler Associate Telephone: (212) 852-6137 Facsimile: (212) 852-6148 Email: barry_wadler@westlb.com D-18 EXHIBIT E EXISTING LIENS PanAmSat $124,000,000.00 Floating Rate Note secured by transponders of Galaxy III-R due 2002 Galaxy Latin America $95,000.00 Capital Lease of AT&T Telephone Switch E-1 EXISTING LIENS EXHIBIT F OPINION OF COUNSEL December 5, 1997 To: The Banks listed on Schedule A hereto; Bank of America National Trust and Savings Association, as Administrative Agent; Morgan Guaranty Trust Company of New York, as Syndication Agent; and Citicorp USA, Inc. and The Chase Manhattan Bank as Documentation Agents Re: Hughes Electronics Corporation Revolving Credit Agreement -------------------------- Gentlemen: I am the Assistant General Counsel of Hughes Electronics Corporation, a Delaware corporation (the "Borrower"), in connection with the extension to Borrower of a revolving line of credit extended under and subject to the terms and provisions of a Revolving Credit Agreement (Multi-Year Facility) dated as of December 5, 1997 (the "Credit Agreement") by and among Borrower, the banks named therein (the "Banks"), Bank of America National Trust and Savings Association, as administrative agent for the Banks (in such capacity "Administrative Agent"), Morgan Guaranty Trust Company of New York, as Syndication Agent and Citicorp USA, Inc. and The Chase Manhattan Bank as Documentation Agents. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement. This opinion is rendered to you pursuant to Section 5.1(a) of the Credit Agreement. As Assistant General Counsel to Borrower, I have caused to be made such legal and factual examinations and inquiries, including an examination of originals or copies, certified or otherwise identified to my satisfaction as authentic, of such corporate records, agreements, instruments and other documents as I have deemed necessary or appropriate for the purposes of this opinion. I have caused to be obtained such certificates and other assurances (copies of which have been delivered to you) from public officials and officers and other employees of Borrower as I considered necessary or appropriate for the purpose of rendering this opinion. I have assumed the genuineness of all signatures (except that of Borrower), the authenticity of all documents submitted to me as originals, and the conformity with the originals of all documents submitted to me as copies. F-1 OPINION OF COUNSEL Subject to the limitations herein set forth, I am opining herein as to the effect on the subject transaction only of United States federal law, the laws of the State of California and the General Corporation Law of the State of Delaware. I am licensed to practice law in the State of California. I assume no responsibility as to the applicability to the subject transaction or the effect thereon of the laws of any other jurisdiction. Based upon the foregoing and in reliance thereon, and subject to the qualifications, limitations and assumptions set forth herein, I am of the opinion that, as of the date hereof: 1. Borrower is a corporation duly incorporated and validity existing as a corporation in good standing under the laws of the State of Delaware, with full corporate power and authority to own and lease its properties and conduct its business as presently owned and conducted. 2. Borrower is duly qualified to do business as a foreign corporation in good standing in the State of California. 3. Borrower has full corporate power and authority to borrow the sums provided for in the Credit Agreement, to execute and deliver the Credit Agreement and to perform its obligations thereunder. 4. All corporate action required to be taken by Borrower for the authorization, execution and delivery of the Credit Agreement by Borrower and the performance by Borrower of its obligations thereunder has been duly taken. 5. The officer of Borrower executing the Credit Agreement is duly and properly in office and duly authorized to execute the same. 6. The Credit Agreement is a valid and binding agreement of Borrower, subject to the limitations, qualifications, exceptions and assumptions set forth below. 7. To my knowledge, after causing to be conducted such legal and factual examination and inquiries and causing to be conducted such discussions with and obtaining such certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, no consent, permission, authorization, order or license of any United States federal or California governmental authority is necessary in connection with the execution and delivery of the Credit Agreement by Borrower and Borrower's performance of its obligations under the Credit Agreement. 8. There is no provision of the Certificate of Incorporation or the By- laws of Borrower which would be contravened by the execution and delivery of the Credit Agreement by Borrower or by the performance by Borrower of its obligations under the Credit Agreement. 9. Borrower is not an "investment company" as defined in the Investment Company Act of 1940, as amended. 10. To my knowledge, after causing to be conducted such legal and factual examination and inquiries and causing to be conducted such discussions with and obtaining such F-2 OPINION OF COUNSEL certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, no consent or approval of any trustee or holder of any material indebtedness of Borrower is necessary in connection with the execution and delivery of the Credit Agreement by Borrower and Borrower's performance of its obligations under the Credit Agreement. 11. There is no provision of any indenture or material agreement for borrowed money to which Borrower is a party or under which Borrower is obligated, and of which I am aware, after causing to be conducted such legal and factual examinations and inquiries and causing to be conducted such discussion with and obtaining such certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, which would be contravened by the execution and delivery of the Credit Agreement and the Notes by Borrower or by the performance by Borrower of its obligations under the Credit Agreement. 12. To my knowledge, after causing to be conducted such legal and factual examinations and inquiries and causing to be conducted such discussions with and obtaining such certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, there is no judgment, decree or order of any court or governmental agency binding on Borrower which would be contravened by the execution and delivery of the Credit Agreement by Borrower and Borrower's performance of its obligations under the Credit Agreement and the Notes. 13. To my knowledge, after causing to be conducted such legal and factual examinations and inquiries and obtaining certificates or other confirmations from officers and employees of Borrower as I considered appropriate in the circumstances, except as set forth in Attachment 1 hereto, there is no claim, suit, action or proceeding pending or threatened against Borrower before any court or governmental agency in which there is a specific claim, including environmental matters, in excess of $75,000,000. The opinion expressed in paragraph 6 is subject to the following limitations, qualifications, exceptions and assumptions: (a) the enforcement of the Credit Agreement and the Notes may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws or by equitable principles relating to or limiting the rights of creditors generally; (b) the use of the term enforceable shall not imply any opinion as to the availability of equitable remedies; (c) I advise you that a California court may not strictly enforce certain covenants contained in the Credit Agreement or allow acceleration of the maturity of the indebtedness thereunder if it concludes that such enforcement or acceleration would be unreasonable under the then existing circumstances. I do believe, however, that subject to the limitations expressed elsewhere in this opinion, enforcement or acceleration would be available if an Event of Default occurs as a result of a material breach of a material covenant contained in the Credit Agreement. F-3 OPINION OF COUNSEL Further, certain rights, remedies and waivers contained in the Credit Agreement may be limited or rendered ineffective by applicable California laws or judicial decisions governing such provisions, but such laws or judicial decisions do not render the Credit Agreement invalid as a whole; (d) The effect of California court decisions, invoking statutes or principles of equity, which have held that certain covenants and provisions of agreements are unenforceable where (i) the breach of such covenants or provisions imposes restrictions or burdens upon the debtor, including the acceleration of indebtedness due under debt instruments, and it cannot be demonstrated that the enforcement of such restrictions or burdens is reasonably necessary for the protection of the creditor, or (ii) the creditor's enforcement of such covenants or provisions under the circumstances would violate the creditor's implied covenant of good faith and fair dealing; (e) The unenforceability under certain circumstances, under California or federal law or court decisions, of provisions expressly or by implication waiving broadly or vaguely stated rights, unknown future rights, defenses to obligations or rights granted by law, where such waivers are against public policy or prohibited by law; (f) The unenforceability under certain circumstances of provisions to the effect that rights or remedies are not exclusive, that every right or remedy is cumulative and may be exercised in addition to or with any other right or remedy, that election of a particular remedy or remedies does not preclude recourse to one or more other remedies or that failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any such right or remedy; (g) The effect of Section 1717 of the California Civil Code, which provides that, where a contract permits one party to the contract to recover attorneys' fees, the prevailing party in any action to enforce any provision of the contract shall be entitled to recover its reasonable attorneys' fees; (h) The unenforceability under certain circumstances of provisions indemnifying a party against liability for its own wrongful or negligent acts or where such indemnification is contrary to public policy or prohibited by law; and (i) The enforceability under certain circumstances of provisions imposing penalties, forfeitures, late payment charges or an increase in interest rate upon delinquency in payment or the occurrence of a default. To the extent that the obligations of Borrower may be dependent upon such matters, I assume for purposes of this opinion that each of the Banks is duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization; that each of the Banks is duly qualified to engage in the transaction covered by this opinion; that the Credit Agreement has been duly authorized, executed and delivered by each of the Banks and that the Credit Agreement constitutes the valid and binding obligation of each of the Banks, enforceable in accordance with its terms; and that each of the Banks has the requisite corporate or organizational and legal power and authority to own its properties, to carry on its business as now being conducted and to perform its obligations under the Credit Agreement, F-4 OPINION OF COUNSEL including without limitation, to make the loans under the Credit Agreement. I am not expressing any opinion as to the effect of or the compliance by any Bank with any state or federal laws or regulations applicable to the transactions because of the nature of its respective business. This opinion is rendered to the Banks and Administrative Agent and is solely for their benefit in connection with the above transaction. This opinion may not be relied upon by the Banks or Administrative Agent for any other purpose, or furnished to, quoted to or relied upon by any other person, firm or corporation for any purpose without my prior written consent. Very truly yours, F-5 OPINION OF COUNSEL SCHEDULE A TO OPINION OF COUNSEL Allfirst Bank Bankers Trust Company Credit Suisse First Boston The Long-Term Credit Bank of Japan, Ltd., Los Angeles Agency The Mitsubishi Trust & Banking Corporation, New York Branch NationsBank of Texas, N.A. The Toronto-Dominion Bank Banca di Roma - San Francisco Branch The Bank of New York CIBC Inc. Credit Lyonnais New York Branch Deutsche Bank AG New York and/or Cayman Islands Branches Bank One, N.A. The Fuji Bank, Limited, Los Angeles Agency The Industrial Bank of Japan, Limited, Los Angeles Agency Istituto Bancario San Paolo di Torino SpA Union Bank of California F-6 OPINION OF COUNSEL ATTACHMENT 1 TO OPINION OF COUNSEL F-7 OPINION OF COUNSEL LITIGATION None F-8 OPINION OF COUNSEL EXHIBIT G [FORM OF COMPLIANCE CERTIFICATE] COMPLIANCE CERTIFICATE THE UNDERSIGNED HEREBY CERTIFY THAT: (1) I am the duly elected [Title] and [Title] of Hughes Electronics Corporation, a Delaware corporation ("Borrower"); (2) I have reviewed the terms of that certain Amended and Restated Revolving Credit Agreement (Multi-Year Facility) dated as of November 24, 1999, as amended, supplemented or otherwise modified to the date hereof (said Revolving Credit Agreement, as so amended, supplemented or otherwise modified, being the "Credit Agreement", the terms defined therein and not otherwise defined in this Certificate (including Attachment No. 1 annexed hereto and made a part hereof) being used in this Certificate as therein defined), by and among Borrower, the financial institutions listed therein as Banks, and Bank of America, N.A. (formerly known as Bank of America national Trust and Savings Association), as Administrative Agent, and I have made, or have caused to be made under my supervision, a review in reasonable detail of the transactions and condition of Borrower and its Subsidiaries during the accounting period covered by the attached financial statements; and (3) The examination described in paragraph (2) above did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes an Event of Default or Unmatured Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate[, except as set forth below]. [Set forth [below] [in a separate attachment to this Certificate] are all exceptions to paragraph (3) above listing, in detail, the nature of the condition or event, the period during which it has existed and the action which Borrower or any of its Subsidiaries, as applicable, has taken, is taking, or proposes to take with respect to each such condition or event: _______________________________________________________________________________] G-1 FORM OF COMPLIANCE CERTIFICATE The foregoing certifications, together with the computations set forth in Attachment No. 1 annexed hereto and made a part hereof and the financial statements delivered with this Certificate in support hereof, are made and delivered this __________ day of _____________, ____ pursuant to subsection 7.5(d) of the Credit Agreement. DATED: ____________________ HUGHES ELECTRONICS CORPORATION By:_____________________________ Name: Title: G-2 FORM OF COMPLIANCE CERTIFICATE ATTACHMENT NO. 1 TO COMPLIANCE CERTIFICATE This Attachment No. 1 is attached to and made a part of a Compliance Certificate dated as of ____________, ____ and pertains to the period from ____________, ____ to ____________, ____. Subsection references herein relate to subsections of the Credit Agreement. A. Maximum Leverage Ratio (for the four-fiscal quarter period ending _____________, ____) 1. Outstanding principal amount of all obligations and liabilities for borrowed money: $____________ 2. portion of obligations with respect to capital leases that are capitalized in excess of $25,000,000: $____________ 3. Consolidated Funded Indebtedness (1+2): $____________ 4. Consolidated Net Income: $____________ 5. Consolidated Interest Charges: $____________ 6. Provisions for taxes, if any, based on income used or included in determining of 5: $____________ 7. Total depreciation expense deducted in determining 5: $____________ 8. Total amortization expense deducted in determining 5: $____________ 9. Adjustments per clauses (e) and (f) of definition of Consolidated EBITDA: (a) Asia Pacific Mobile $____________ (b) Hughes Space and Communication $____________ (c) ICO Global Communications $____________ (d) Hughes Network Systems wireless business $____________ (e) PanAmSat launch delays $____________ (f) DirecTV Japan, Ltd. $____________ Total $============ G-3 FORM OF COMPIANCE CERTIFICATE 10. Less DirecTV Japan, Ltd. cash losses per clause (h) of definition of consolidated EBITDA $_____________ 11. Non-cash charges resulting from a change in business strategy regarding DirecTV Japan Ltd. (only for fiscal quarter ending fiscal year ending December 31, 2000) $_____________ 12. Consolidated EBITDA (4+5+6+7+8+9-10+11): $_____________ 13. Leverage Ratio (3):(12): ____:1.00 14. Maximum ratio allowed under subsection 8.5(b): ____:1.00 B. Minimum Shareholders' Equity 1. Base Shareholders' Equity: $7,125,000,000 2. 50% of consolidated net income (as determined in accordance with GAAP) earned in each fiscal quarter ending after December 31, 1998 (with no deduction for a net loss in any such fiscal quarter): $_____________ 3. 50% aggregate increase in Equity by reason of Borrower's issuance of capital stock: $_____________ 4. Minimum Shareholders' Equity (1+2+3): $_____________ 5. Shareholders' Equity $_____________ G-4 FORM OF COMPIANCE CERTIFICATE EXHIBIT H [FORM OF NOTICE OF ASSIGNMENT AND ACCEPTANCE] [Date] To: Bank of America, N.A., as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Amended and Restated Revolving Credit Agreement (Multi-Year Facility) dated as of November 24, 1999 between Hughes Electronics Corporation, a Delaware corporation ("Borrower"), Lenders from time -------- to time party thereto, and Bank of America, N.A., as Administrative Agent (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as --------- therein defined). 1. We hereby give you notice of, and request your consent to, the assignment by [_________________________] (the "Assignor") to [______________________] (the -------- "Assignee") of __________% of the right, title and interest of the Assignor in -------- and to the Agreement, including the right, title and interest of the Assignor in and to the Commitment of the Assignor and all outstanding Loans made by the Assignor. Before giving effect to such assignment: (a) the aggregate amount of the Assignor's Commitment is $___________; and (b) the aggregate principal amount of its outstanding Loans is $_________. 2. The Assignee hereby represents and warrants that it has complied with the requirements of Section 11.11 of the Agreement in connection with this ------------- assignment and acknowledges and agrees that: (a) other than the representation and warranty that it is the legal and beneficial owner of the Normal Percentage being assigned thereby free and clear of any adverse claim, the Assignor has made no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Agreement or the execution, legality, validity, enforceability, genuineness or sufficiency of the Agreement; (b) the Assignor has made no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance by Borrower of its obligations under the Agreement; (c) it has received a copy of the Agreement, together with copies of the most recent financial statements delivered pursuant to Section 7.5 thereof ----------- and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (d) it will, independently and without reliance upon Administrative Agent or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement; (e) it appoints and authorizes Administrative Agent to take such action and to exercise such powers under the Agreement as are delegated to Administrative Agent by the Agreement; and (f) it will perform in accordance with their terms all of the obligations which by the terms of the Agreement are required to be performed by it as a Bank. 3. The Assignee agrees that, upon receiving your consent to such assignment and from and H-1 Assignment and Acceptance Agreement after [________, ____], the Assignee will be bound by the terms of the Agreement, with respect to the interest in the Agreement assigned to it as specified above, as fully and to the same extent as if the Assignee were a Bank originally holding such interest in the Agreement. H-2 Assignment and Acceptance Agreement 4. The following administrative details apply to the Assignee: (a) Offshore Lending Office: Assignee name:________________________________ Address:______________________________________ ______________________________________________ Attention:____________________________________ Telephone: (___) ____________________________ Telecopier: (___) ____________________________ (b) Domestic Lending Office: Assignee name:________________________________ Address:______________________________________ ______________________________________________ Attention:____________________________________ Telephone: (___) ____________________________ Telecopier: (___) ____________________________ (c) Notice Address: Assignee name:________________________________ Address:______________________________________ ______________________________________________ Attention:____________________________________ Telephone: (___) ____________________________ Telecopier: (___) ____________________________ (d) Payment Instructions: Account No.: Account No.___________________________________ Attention:____________________________________ Reference:____________________________________ H-3 Assignment and Acceptance Agreement IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice of Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned. Very truly yours, [ASSIGNOR] By: _________________________________________ Name: Title: [ASSIGNEE] By: _________________________________________ Name: Title: We hereby consent to the foregoing assignment. HUGHES ELECTRONICS CORPORATION By: ________________________________ Name: Title: BANK OF AMERICA, N.A., as Administrative Agent By: ________________________________ Name: Title: H-4 Assignment and Acceptance Agreement EX-10.10 10 1ST AMEND REVOLV CREDIT AGREE 12/31/99 MULTI-YEAR EXHIBIT 10.10 HUGHES ELECTRONICS CORPORATION FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (MULTI-YEAR FACILITY) This FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (MULTI-YEAR FACILITY) (this "Amendment") is dated as of December 31, 1999 and entered into by and among HUGHES ELECTRONICS CORPORATION, a Delaware corporation (the "Borrower"), the financial institutions listed on the signature pages hereof (the "Banks"), BANK OF AMERICA, N.A., as the administrative agent for the Banks (in such capacity the "Administrative Agent"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as the syndication agent (in such capacity the "Syndication Agent") and CITICORP USA, INC. and THE CHASE MANHATTAN BANK, as documentation agents (the "Documentation Agents") and is made with reference to that certain Amended and Restated Revolving Credit Agreement (Multi-Year Facility) dated as of November 24, 1999 (as so amended, the "Credit Agreement"), by and among the Borrower, the lending institutions identified therein, the Administrative Agent, the Syndication Agent and the Documentation Agents. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Borrower and Banks desire to amend the Credit Agreement to (i) revise the definition of Consolidated EBITDA; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 Amendments to Section 1: Definitions ------------------------------------- Subsection 1.1 of the Credit Agreement is hereby amended by deleting the definition of Consolidated EBITDA in its entirety, and by replacing it with the following: "Consolidated EBITDA" means, for any period, for Borrower and its Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Consolidated Net Income, (b) Consolidated Interest Charges, (c) the amount of taxes, based on or measured by income, used or included in the determination of such Consolidated Net Income, (d) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income, (e) for each fiscal quarter in the fiscal year ending December 31, 1999, (i) the amount of charges taken in connection with the cancellation of contract with Asia Pacific Mobile Telecommunications, up to an aggregate amount of $92,000,000 for all such fiscal quarters, and (ii) the amount of charges taken in connection with development costs and schedule delays at Hughes Space and Communication up to an aggregate amount of $125,000,000 for all such fiscal quarters, (f) for the last fiscal quarter of the fiscal year ending December 31, 1999, (i) if a non-cash charge is taken in connection with the write-off of equity investment in ICO Global Communications, the amount of such non-cash charge up to an aggregate amount of $62,000,000, (ii) if a non-cash charge is taken in connection with the write-off of equity investment in the Hughes Network Systems wireless business, the amount of such non-cash charge up to an aggregate amount of $272,000,000, and (iii) if a change in business strategy related to DirecTV Japan, Ltd. results in cash and/or non-cash charges, the amount of such cash and/or non-cash charges up to an aggregate amount of $250,000,000, and (g) for each fiscal quarter in the fiscal year ending December 31, 2000, the amount of non-cash charges taken in connection with ICO Global Communications and PanAmSat launch delays, up to an aggregate amount for all such fiscal quarters of (x) $150,000,000 minus (y) the amount of the charge, if any, added pursuant to clauses (f)(i) above; minus (h) for each fiscal quarter ----- in the fiscal year ending December 31, 2000, the amount of cash losses (whether or not accounted for as charges under GAAP) in connection with DirecTV Japan, Ltd., but only if such cash losses were reflected in the charges, if any, added pursuant to clause (f)(iii); plus (i) for each fiscal quarter in the fiscal year ---- ending December 31, 2000, if any change in business strategy regarding DirecTV Japan, Ltd. results in a non-cash charge, the amount of such non-cash charge up to an aggregate amount of $150,000,000 minus the amount of non-cash charges, if any, added pursuant to clause (f)(iii) above. 2. CONDITIONS TO EFFECTIVENESS Section 1 of this Amendment shall become effective only upon the satisfaction of all of the following conditions precedent (the date of satisfaction of such conditions being referred to herein as the "Amendment Effective Date"): (A) On or before the Amendment Effective Date, Borrower shall deliver to the Banks (or to the Administrative Agent for the Banks with sufficient originally executed copies, where appropriate, for each Bank and its counsel) the following, each, unless otherwise noted, dated the Amendment Effective Date: (1) A certificate, signed by a vice president or assistant treasurer of Borrower dated the Amendment Effective Date certifying: (i) that the representations and warranties of Borrower contained in the Credit Agreement are true and correct in all material respects; and (ii) that, after giving effect to this Amendment, no event has occurred and is continuing or would result from the making of a Loan which constitutes or would constitute an Event of Default or an Unmatured Event of Default; and (2) Copies of this Amendment executed by Borrower, the Majority Banks and the Administrative Agent. (B) All fees and other amounts due to the Administrative Agent, Syndication Agent, Documentation Agents, Arranger and any Bank through the Amendment Effective Date from Borrower shall have been received by such person. 2 3. BORROWER'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Borrower represents and warrants to each Bank that the following statements are true, correct and complete: (A) Corporate Power and Authority. Borrower has all requisite ----------------------------- corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "Amended Agreement"). (B) Authorization of Agreements. The execution and delivery of this --------------------------- Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Borrower. (C) No Contravention. There is no charter, by-law, or capital stock ---------------- provision of Borrower and no provision of any indenture or material agreement, written or oral, to which Borrower is a party or under which Borrower is obligated, nor is there any statute, rule or regulation, or any judgment, decree or order of any court or agency binding on Borrower which would be contravened by the execution, delivery and performance of any provision, condition, covenant or other term of this Amendment or the Amended Agreement. (D) Binding Obligation. This Amendment and the Amended Agreement are ------------------ the legal, valid and binding obligation of Borrower, enforceable against it in accordance with their terms, and any instrument or agreement required hereunder or by the Amended Agreement, when executed and delivered, will be similarly valid, binding and enforceable. (E) Incorporation of Representations and Warranties From Credit ----------------------------------------------------------- Agreement. The representations and warranties contained in Section 6 of the - --------- Credit Agreement are and will be true, correct and complete in all material respects on and as of the Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. (F) Absence of Default. After giving effect to this Amendment, no ------------------ event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Unmatured Event of Default. 4. MISCELLANEOUS (A) Reference to and Effect on the Credit Agreement and the Other Loan Documents. (i) On and after the Amendment Effective Date, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other documents entered 3 pursuant to the Credit Agreement to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other documents entered pursuant to the Credit Agreement shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. (B) Fees and Expenses. Borrower acknowledges that all costs, fees ----------------- and expenses as described in subsection 11.14 of the Credit Agreement incurred by the Arranger, the Administrative Agent and their counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of Borrower. (C) Headings. Section and subsection headings in this Amendment are -------- included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. (D) California Law. The interpretation, enforcement and effect of -------------- this Amendment shall be governed and controlled in all respects by and construed according to the substantive laws of the State of California. (E) Counterparts; Effectiveness. This Amendment may be executed in --------------------------- any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment (other than the provisions of Section 1 hereof, the effectiveness of which is governed by Section 2 hereof) shall become effective upon the execution of a counterpart hereof by Borrower and Majority Banks and receipt by Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. HUGHES ELECTRONICS CORPORATION By: _______________________________ Name: Title: S-1 BANK OF AMERICA, N.A., as Administrative Agent By: ____________________________ Name: Title: S-2 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Syndication Agent and a Bank By: __________________________________ Name: Title: S-3 CITICORP USA, INC., as Documentation Agent and a Bank By: _________________________________ Name: Title: S-4 THE CHASE MANHATTAN BANK, as Documentation Agent and a Bank By: ______________________________ Name: Title: S-5 BANK OF AMERICA, N.A., as a Bank By: _____________________________ Name: Title: S-6 BANKERS TRUST COMPANY By: ____________________________ Name: Title: S-7 CREDIT SUISSE FIRST BOSTON By: __________________________ Name: Title: By: __________________________ Name: Title: S-8 [RESERVED] S-9 THE MITSUBISHI TRUST AND BANKING CORPORATION, NEW YORK BRANCH By: _______________________________ Name: Title: S-10 [RESERVED] S-11 TORONTO-DOMINION (TEXAS), INC. By: _____________________________ Name: Title: S-12 BANCA DI ROMA - SAN FRANCISCO By: ____________________________________ Name: Title: By: ____________________________________ Name: Title: S-13 THE BANK OF NEW YORK By: ____________________________________ Name: Title: S-14 CIBC INC. By: ____________________________________ Name: Title: S-15 ING LEASE INTERNATIONAL EQUIPMENT FINANCE B.V. By: ____________________________________ Name: Title: S-16 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES By: ____________________________________ Name: Title: By: ____________________________________ Name: Title: S-17 BANK ONE, NA By: ____________________________________ Name: Title: S-18 ALLFIRST BANK By: ____________________________________ Name: Title: S-19 THE FUJI BANK, LIMITED By: ____________________________________ Name: Title: S-20 THE INDUSTRIAL BANK OF JAPAN, LIMITED LOS ANGELES AGENCY By: ____________________________________ Name: Title: S-21 SANPAOLO IMI SpA By: ____________________________________ Name: Title: By: ____________________________________ Name: Title: S-22 UNION BANK OF CALIFORNIA, N.A. By: ____________________________________ Name: Title: S-23 BANK HAPOALIM B.M. By: ____________________________________ Name: Title: By: ____________________________________ Name: Title: S-24 THE FUJI BANK, LIMITED By: ____________________________________ Name: Title: S-25 MERCANTILE BANK NATIONAL ASSOCIATION By: ____________________________________ Name: Title: S-26 THE MITSUBISHI TRUST AND BANKING CORPORATION, NEW YORK BRANCH By: ____________________________________ Name: Title: S-27 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH By: ____________________________________ Name: Title: By: ____________________________________ Name: Title: S-28 EX-10.11 11 REVOLV CREDIT AGREE BRIDGE FACILITY NOV. 24 1999 EXHIBIT 10.11 ================================================================================ Revolving Credit Agreement (Bridge Facility) Dated as of November 24, 1999 among Hughes Electronics Corporation The Banks named herein And Bank of America, N.A. as Administrative Agent Lead Arrangers and Book Managers: Banc of America Securities LLC and Salomon Smith Barney Inc. [LOGO] ================================================================================ SECTION 1 DEFINITIONS 1.1 Definitions................................................................ 1 SECTION 2 THE CREDIT 2.1 The Commitments............................................................ 9 2.2 The Loans.................................................................. 10 2.3 Requests for Base Rate and Eurodollar Loans................................ 10 2.4 Limitations on Borrowing................................................... 10 2.5 Interest and Principal on Base Rate Loans.................................. 10 2.6 Interest and Principal on Eurodollar Loans................................. 10 2.8 Loan Accounts.............................................................. 11 2.10 Conversion of Loans Between Eurodollar Loans and Base Rate Loans and Conversion of Interest Periods of Eurodollar Loans......................... 11 2.11 Disbursements and Payments................................................. 12 2.12 Facility Fee............................................................... 13 2.13 Prepayments and Reductions in Total Commitment............................. 13 SECTION 3 PAYMENT OF COSTS AND REDUCTION OF THE COMMITMENT 3.1 Indemnification Upon Failure to Pay Eurodollar Loan........................ 14 3.2 Increased Costs............................................................ 14 3.3 Taxes...................................................................... 15 3.4 Prepayment................................................................. 16 3.5 Pro Rata Reduction of Commitments by Borrower.............................. 16 3.6 Reduction of One Bank's Commitment by Borrower............................. 16 3.7 Notice of Reductions....................................................... 17 3.8 Designation of Replacement Bank............................................ 17 3.9 Effect of Reduction of Commitment.......................................... 17 3.10 Accrued Fees............................................................... 17 3.11 Survival................................................................... 17 SECTION 4 CHANGE IN CIRCUMSTANCES AFFECTING LOANS 4.1 Inability to Determine Eurodollar Rate..................................... 18 4.2 Illegality................................................................. 18 SECTION 5 CONDITIONS PRECEDENT 5.1 Conditions Precedent to Signing Date....................................... 19
-i- 5.2 Conditions Precedent to Effective Date...................................... 19 5.3 Conditions Precedent to Loans............................................... 20 SECTION 6 REPRESENTATIONS AND WARRANTIES 6.1 Authority of Borrower....................................................... 20 6.2 Binding Obligations......................................................... 20 6.3 Incorporation of Restricted Subsidiaries.................................... 21 6.4 No Contravention............................................................ 21 6.5 Notices..................................................................... 21 6.6 Financial Statements........................................................ 21 6.7 ERISA....................................................................... 21 6.8 Regulation U; Investment Company Act........................................ 21 6.9 Taxes....................................................................... 22 6.10 Insurance................................................................... 22 6.11 Liens....................................................................... 22 6.12 Litigation.................................................................. 22 6.13 Environmental Compliance.................................................... 22 6.14 Year 2000................................................................... 22 6.15 Disclosure.................................................................. 22 SECTION 7 AFFIRMATIVE COVENANTS OF BORROWER 7.1 Use of Proceeds of Loans.................................................... 23 7.2 Management of Business...................................................... 23 7.3 Notice of Certain Events.................................................... 23 7.4 Records..................................................................... 24 7.5 Information Furnished....................................................... 24 7.6 Execution of Other Documents................................................ 25 7.7 ERISA....................................................................... 25 7.8 Administrative Agent's Fees................................................. 25 7.9 Compliance with Law......................................................... 25 7.10 Compliance with Agreements.................................................. 25 7.11 Maintenance of Insurance.................................................... 26 SECTION 8 NEGATIVE COVENANTS OF BORROWER 8.1 Liens....................................................................... 26 8.2 Mergers, Liquidations and Sales of Assets................................... 27 8.3 Defaults.................................................................... 28 8.4 Compliance with Regulations................................................. 28 8.5 Financial Covenants......................................................... 28
-ii- SECTION 9 EVENTS OF DEFAULT 9.1 Events of Default.......................................................... 29 9.2 Recovery of Amounts Due.................................................... 32 9.3 Rights Cumulative.......................................................... 32 SECTION 10 THE BANKS 10.1 Administration of Loan..................................................... 33 10.2 Representations By Banks................................................... 33 SECTION 11 MISCELLANEOUS PROVISIONS 11.1 Amendments and Waivers..................................................... 33 11.2 Notices.................................................................... 33 11.3 Waiver..................................................................... 34 11.4 California Law............................................................. 34 11.5 Headings................................................................... 34 11.6 Accounting Terms........................................................... 34 11.7 Counterparts............................................................... 34 11.8 Written Disclosure......................................................... 34 11.9 Singular; Plural........................................................... 35 11.10 Illegality................................................................. 35 11.11 Assignments................................................................ 35 11.12 Obligations Several........................................................ 35 11.13 Participations............................................................. 35 11.14 Fees and Expenses.......................................................... 36 11.15 Indemnity.................................................................. 37 11.16 Confidentiality............................................................ 37 11.17 Waiver of Right to Trial by Jury........................................... 39
EXHIBITS A Form of Loan Request B Relations Among the Banks and Agents C Addresses and Lending Offices of Banks D Existing Liens E Form of Opinion of General Counsel F Compliance Certificate G Assignment and Acceptance SCHEDULE 1 Name of Banks and Commitments -iii- REVOLVING CREDIT AGREEMENT (BRIDGE FACILITY) THIS REVOLVING CREDIT AGREEMENT (BRIDGE FACILITY) ("Agreement") is entered into as of November 24, 1999 (the "Signing Date") among HUGHES ELECTRONICS CORPORATION, a corporation organized and existing under the laws of Delaware ("Borrower"), the banks named herein (collectively, together with any other lenders that become parties hereto pursuant to Section 3.8 or 11.11, the "Banks" and individually a "Bank") and Bank of America, N.A., as administrative agent for the Banks (in such capacity "Administrative Agent"). SECTION 1 DEFINITIONS 1.1 Definitions. ----------- "Applicable Amount" means, for the facility fee and Eurodollar Loans, the amount (expressed in basis points per annum) set forth in the chart below opposite the applicable period:
=========================================================== Applicable Amount (in basis points per annum) ------------------------------------- Period Eurodollar Rate Facility Fee + ------------------------------------------------------------ Effective Date 82.5 17.5 through June 30, 2000 ------------------------------------------------------------ July 1, 2000 and 107.5 17.5 thereafter ===========================================================
"Approved Bank Affiliate" means a Person that is a subsidiary of a Bank or of a Person of which a Bank is a subsidiary, and which is either engaged primarily in the business of commercial banking or, if not so engaged, which has been approved by the Borrower and Administrative Agent (provided that Borrower's -------- consent shall not be unreasonably withheld). "Arrangers" means BAS and Salomon Smith Barney Inc. "Attorney Costs" means and includes all fees and disbursements of any law firm or other external counsel and the allocated cost of internal legal services and all disbursements of internal counsel. -1- "Authorized Designee" means the chief executive officer, the vice chairman, the chief financial officer, treasurer or the assistant treasurer of Borrower, or any other officer of Borrower specified as being an Authorized Designee in the certificate delivered pursuant to Section 5.2(c). "Availability Period" means the period commencing on the Effective Date and ending on the Termination Date. "Bank of America" means Bank of America, N.A. in its capacity as a Bank. "BAS" means Banc of America Securities LLC. "Base Rate" means the higher of: (a) the rate of interest publicly announced from time to time by Bank of America as its "reference rate," which is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate; and (b) one-half percent per annum above the Federal Funds Rate. Any change in the reference rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Loan" means a Loan bearing interest based on the Base Rate calculated pursuant to Section 2.5. "Borrowing Date" means a date on which funds are advanced to Borrower by one or more Banks pursuant to a Loan Request. "Business Day" means a day other than a Saturday or Sunday on which banks are open for business in both San Francisco, California and New York, New York. "Commercial Paper" means short term commercial paper (with a maturity date not in excess of 270 days from the date of its issuance) issued by Borrower (a) pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended or modified from time to time, or (b) pursuant to the exemption from registration contained in Section 3(a)(3) of the Securities Act of 1933, as amended or modified from time to time, with respect to which a recognized rating agency has taken this Agreement into account in the rating of such short term commercial paper. "Commitment" of each Bank means the dollar amount set forth opposite such Bank's name on Schedule 1 hereto, as such amount may be reduced or changed pursuant to Sections 3.5 and 3.6. "Compliance Certificate" means a certificate in the form of Exhibit F, --------- properly completed and signed by Borrower's Treasurer or an Assistant Treasurer. "Consolidated Adjusted Net Worth" means, as of the date of determination thereof, the consolidated stockholders equity of Borrower and its Subsidiaries in accordance with GAAP adjusted by adding back the amount by which such consolidated stockholders equity has been reduced (or by subtracting the amount by which stockholders equity has been increased) on -2- account of (a) changes subsequent to December 31, 1992 in the long term liability of Borrower and its Subsidiaries for post-retirement benefits other than pensions and (b) specified material non-cash adjustments resulting from the adoptions of future pronouncements of the Financial Accounting Standards Board. "Consolidated EBITDA" means, for any period, for Borrower and its Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Consolidated Net Income, (b) Consolidated Interest Charges, (c) the amount of taxes, based on or measured by income, used or included in the determination of such Consolidated Net Income, (d) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income, (e) for each fiscal quarter in the fiscal year ending December 31, 1999, (i) the amount of charges taken in connection with the cancellation of the contract with Asia Pacific Mobile Telecommunications, up to an aggregate amount of $92,000,000 for all such fiscal quarters, and (ii) the amount of charges taken in connection with development costs and schedule delays at Hughes Space and Communication up to an aggregate amount of $125,000,000 for all such fiscal quarters, (f) for the last fiscal quarter of the fiscal year ending December 31, 1999, (i) if a non- cash charge is taken in connection with the write-off of equity investment in ICO Global Communications, the amount of such non-cash charge up to an aggregate amount of $62,000,000 and (ii) if a change in business strategy related to DirecTV Japan, Ltd. results in cash and/or non-cash charges, the amount of such cash and/or non-cash charges up to an aggregate amount of $250,000,000, and (g) for each fiscal quarter in the fiscal year ending December 31, 2000, the amount of non-cash charges taken in connection with ICO Global Communications, the Hughes Network Systems wireless business and PanAmSat launch delays, up to an aggregate amount for all such fiscal quarters of (x) $500,000,000 minus (y) the amount of the charge, if any, added pursuant to clause (f)(i) above; minus (h) for each fiscal quarter in the fiscal year ending December 31, 2000 , the amount of cash losses (whether or not accounted for as charges under GAAP) in connection with DirecTV Japan, Ltd., but only if such cash losses were reflected in the charges, if any, added pursuant to clause (f)(ii); plus (i) for each fiscal quarter in the fiscal year ending December 31, 2000, if any change in business strategy regarding DirecTV Japan, Ltd. results in non-cash charges, the amount of such non-cash charges up to an aggregate amount of $150,000,000, minus the amount of non-cash charges, if any, added pursuant to clause (f)(ii) above. "Consolidated Funded Indebtedness" means, as of any date of determination, for Borrower and its Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal amount of all obligations and liabilities, whether current or long-term, for borrowed money (including Loans hereunder), and (b) that portion of obligations with respect to capital leases that are capitalized in the consolidated balance sheet of Borrower and its Subsidiaries in excess of an aggregate amount of $25,000,000. "Consolidated Interest Charges" means, for any period, for Borrower and its Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments, fees, charges and related expenses payable by Borrower and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets and imputed interest associated with the assumption of liabilities relating to programming contracts under purchase accounting in accordance with GAAP, in each case to the extent treated as interest in accordance with GAAP, and (b) the portion of rent payable by Borrower and its -3- Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP. "Consolidated Net Income" means, for any period, for Borrower and its Subsidiaries on a consolidated basis, the net income of Borrower and its Subsidiaries from continuing operations after extraordinary items (excluding gains or losses from Dispositions of assets) for that period. "Consolidated Tangible Net Worth" means, at any date of determination, Consolidated Adjusted Net Worth less the consolidated intangible assets of ---- Borrower and its Subsidiaries, determined in accordance with GAAP. "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "Debt Rating" means, as of any date of determination, the rating as determined by either Standard & Poor's Ratings Group or Moody's Investors Service, Inc. (collectively, the "Debt Ratings"); of (a) the Borrower's senior unsecured long-term debt or (b) if the foregoing debt is not outstanding, then the rating of the Multi-Year Credit Agreement or the implied rating of senior unsecured and non-credit enhanced debt securities, provided that if both ratings -------- in this clause (b) have been issued then both shall apply; or (c) if neither (a) nor (b) apply, then the rating of long-term debt issued by equipment trust guaranteed by Borrower; provided that if a Debt Rating is issued by both of such -------- rating agencies, then the lower of such credit ratings shall apply unless the split in credit ratings is more than one level, in which case the level one level higher than the lower rating shall apply. Initially, the Debt Ratings shall be determined from the certificate delivered pursuant to Section 5.2(d). Thereafter the credit ratings shall be determined from the most recent public announcement of any changes in such credit ratings. "Default Rate" means an interest rate equal to the Base Rate plus the ---- Applicable Amount, if any, applicable to Base Rate Loans plus 2% per annum, to ---- the fullest extent permitted by applicable Laws; provided, however, that with -------- ------- respect to a Eurodollar Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Amount) otherwise applicable to such Loan plus 2% per annum. "Effective Date" means the date on or before December 10, 1999 that the conditions set forth in Section 5.2 are satisfied or waived by the Majority Banks. "Eligible Assignee" means a Person which can lawfully fulfill all of the obligations of a Bank hereunder and is (a) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; or (c) any Person engaged primarily in the business of commercial banking and that is a subsidiary of a Bank or of a Person of which a Bank is a subsidiary. -4- "Environmental Laws" means all foreign, federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case relating to environmental, health, safety and land use matters applicable to any property. "ERISA" means the Employee Retirement Income Security Act of 1974, as in effect from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with Borrower or any Subsidiary of Borrower within the meaning of Section 414(b), 414(c) or 414(m) of Internal Revenue Code of 1986, as amended. "Eurodollar Banking Day" means a day on which banks are open for business in San Francisco, California, New York, New York and the applicable offshore dollar interbank market and dealing in U. S. Dollar deposits. "Eurodollar Loan" means a Loan at the rate of interest calculated pursuant to Section 2.6. "Eurodollar Rate" means for each Interest Period of a Eurodollar Loan the arithmetic mean of the rates of interest rounded to the nearest 1/100 of one percent as notified to the Administrative Agent by the Reference Banks at which U.S. Dollar deposits for such Interest Period and in an amount comparable to the Principal Amount of such Eurodollar Loan would be offered by such Reference Banks to major banks in the London offshore dollar interbank market upon request of such banks at approximately 11:00 a.m. London time two Eurodollar Banking Days prior to the first day of such Interest Period. "Event of Default" means any event specified in Section 9.1. "Federal Funds Rate" means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m. Quotation") for such day under the caption "Federal Funds Effective Rate". If on any relevant day the appropriate rate for such day is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by Administrative Agent. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System, or any successor thereto. "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute -5- of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statements by such other entity as may be in general use by significant segments of the U.S. accounting profession, which are applicable to the circumstances as of the date of determination. "Governmental Authority" means (a) any international, foreign, federal, state, county or municipal government, or political subdivision thereof, (b) any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality, central bank or public body, or (c) any court, administrative tribunal or public utility. "Interest Payment Date" means, with respect to each Eurodollar Loan, the last day of each Interest Period; provided, however, that if any Interest Period -------- ------- exceeds three months, "Interest Payment Date" shall mean the 90th day and the last day of the third month of such Interest Period, respectively, as well as the last day of the relevant Interest Period; and, with respect to each Base Rate Loan, means the 10th day of each January, April, July, and October and the Termination Date. If any day specified herein is not a Business Day or, in the case of a Eurodollar Loan, a Eurodollar Banking Day, then the relevant Interest Payment Date shall be the next succeeding Business Day or Eurodollar Banking Day, as applicable, except as otherwise provided in the definition of Interest Period. Notwithstanding any other provision herein, interest accruing at the Default Rate shall be payable from time to time at any time upon demand of Administrative Agent "Interest Period" means with respect to each Eurodollar Loan, a period of one, two, three or six months as selected by Borrower by a Loan Request delivered to Administrative Agent in accordance with Section 2.3, subject to the following: (i) If the term of an Interest Period is not designated, a period of one month shall be deemed selected for the relevant Eurodollar Loan; (ii) The first Interest Period for each Loan shall commence on the date such Loan is disbursed and each succeeding Interest Period for such Loan shall commence on the last day of the preceding Interest Period for such Loan; (iii) In the case of a Eurodollar Loan, if the last day of an Interest Period falls on a day that is not a Eurodollar Banking Day, the Interest Period involved shall be extended to the next following Eurodollar Banking Day unless as a result thereof it would fall into the next calendar month, in which case the end of the Eurodollar Interest Period shall be the preceding Eurodollar Banking Day, and in either case the next succeeding Eurodollar Interest Period shall be measured from the last day of the Interest Period as so adjusted; (iv) If an Interest Period for a Eurodollar Loan commences on the last Eurodollar Banking Day of a calendar month, it shall end on the last Eurodollar Banking Day of a calendar month; and (v) No Interest Period shall end on a day later than the Termination Date. -6- "Investment Grade" means a Debt Rating by S&P of BBB- or better and Debt Rating by Moody's of Baa3 or better. "Lending Office" means with respect to any Bank as the context shall require, the branch office of such Bank designated as the Lending Office of such Bank in Exhibit C attached hereto and incorporated herein by reference; or any other branch office or affiliate of such Bank hereafter selected and notified to Borrower and Administrative Agent from time to time by such Bank; provided that -------- any Bank may from time to time by notice to Borrower and Administrative Agent designate separate Lending Offices for its Eurodollar Loans and/or its Base Rate Loans, in which case any reference to the Lending Office of such Bank shall be deemed to refer to any or all of such offices, branches or affiliates as the context may require. "Letter Agreement" means that letter agreement among BAS, Administrative Agent and Borrower dated November 3, 1999 specifying Arrangers' and Administrative Agent's compensation for services hereunder as such letter agreement may from time to time be amended, restated, reissued or otherwise modified. "Leverage Ratio" means, as of the end of any fiscal quarter, for the Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA for the period of the four fiscal quarters ended on such date. "Lien" means any trust deed, mortgage, pledge, hypothecation, assignment, security interest, lien, charge or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the lien of an attachment, judgment or execution, or any conditional sale or other title retention agreement, any capitalized lease, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction, but excluding financing statements filed to give notice of leases in the ordinary course of business). "Loan" or "Loans" means the loans described in Section 2, any of which may be at any time Base Rate Loans or Eurodollar Loans. "Loan Request" means a notice given by Borrower pursuant to Section 2.3 or 2.4. "Majority Banks" means those Banks whose Commitments constitute more than 51% of the Total Commitment as such Total Commitment may be adjusted from time to time pursuant to the terms of this Agreement, or if the Commitments have terminated, those Banks holding at least 51% of the outstanding Loans. "Material Adverse Change" means (a) any adverse change which could reasonably be expected to materially impair Borrower's ability to timely and fully perform its obligations under this Agreement or (b) any material adverse change in the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of Borrower and its Subsidiaries, taken as a whole. "Moody's" means Moody's Investors Service, Inc. -7- "Multi-Year Credit Agreement" means the Amended and Restated Revolving Credit Agreement (Multi-Year Facility) dated as of November 24, 1999 among Borrower, the banks named therein, Bank of America, as administrative agent, Morgan Guaranty Trust Company of New York, as syndication agent, and Citicorp USA, Inc. and The Chase Manhattan Bank, as documentation agents, as amended from time to time. "Normal Percentage" means, with respect to each Bank, the percentage under the heading "Normal Percentage" set forth opposite such Bank's name on Schedule 1 hereto, as such amount may be reduced or changed pursuant to Section 3.6 or Section 11.11. "Note" means any promissory note delivered pursuant to Section 2.8 (collectively, the "Notes"). "Notice of Assignment and Acceptance" means a Notice of Assignment and ----------------------------------- Acceptance substantially in the form of Exhibit G. --------- "Person" means any individual, firm, company, corporation, joint venture, joint-stock company, trust, unincorporated organization, Governmental Authority, or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing. "Plan" means any employee benefit pension plan which is subject to the provisions of Title IV of ERISA and which is maintained for employees of Borrower or any Subsidiary. "Principal Amount" means, when used with reference to any Loan, the amount requested in the Loan Request relating thereto and made available to Borrower by the Banks hereunder. "Principal Repayment Date" means, with respect to each Base Rate Loan, the Termination Date, and with respect to each Eurodollar Loan, the last day of the Interest Period for such Loan. "Reference Banks" means Bank of America and Citibank, N.A. "Reportable Event" means any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder excluding those events for which the 30-day notice requirement is waived, a withdrawal from a Plan described in Section 4063 of ERISA, or a cessation of operations described in Section 4062(e) of ERISA. "Restricted Subsidiaries" means each Subsidiary (i) having assets exceeding 10% of the Consolidated Tangible Net Worth of Borrower and its Subsidiaries on a consolidated basis or (ii) having operating revenues exceeding 10% of the operating revenues of Borrower and its Subsidiaries on a consolidated basis, in each case as shown on the financial statements dated as of June 30, 1999 and, thereafter, as shown on the audited consolidated financial statements of Borrower and its Subsidiaries as of the end of the fiscal year immediately preceding the date of determination; provided, however, that "Restricted -------- ------- Subsidiary" shall not include any Subsidiary which is a corporation created solely to purchase receivables from Borrower or any of its Subsidiaries, and which would not, in accordance with GAAP, be included in the consolidated financial statements of Borrower. -8- "S&P" means Standard & Poor's Ratings Group. "Shareholders' Equity" means, as of any date of determination for Borrower and its Subsidiaries on a consolidated basis, shareholders' equity as of that date determined in accordance with GAAP. "Signing Date" means the date of this Agreement. "Subsidiaries" (individually a "Subsidiary") means those corporations or entities of which Borrower owns more than 50% of the voting securities. If Borrower, subject to the terms hereof, permits its ownership to fall to 50% or below of outstanding voting shares of any Subsidiary, such Subsidiary shall thereupon cease to be a Subsidiary for all purposes hereof. "Tax" and "Taxes" mean all taxes, levies, imposts, duties, fees or other charges of whatsoever nature however imposed by any country or any subdivision or authority of or in that country in any way connected with this Agreement or any instrument or agreement required hereunder, and all interest, penalties or similar liabilities with respect thereto, except such taxes as are imposed on or measured by any Bank's net income or capital and franchise taxes, by the country or any subdivision or authority of or in that country in which such Bank's principal office or actual Lending Office is located. "Termination Date" means November 22, 2000; provided, however, that, -------- ------- notwithstanding any other provisions of this Agreement to the contrary, the Termination Date shall occur upon the earlier termination in whole of the Commitments pursuant to Section 3.5 or 9.1. "364-Day Credit Agreement" means the Revolving Credit Agreement (364-day Facility) dated as of November 24, 1999 among Borrower, the banks parties thereto, Bank of America, N.A., as administrative agent for such banks, Citicorp USA, Inc., as Syndication Agent and Deutsche Bank AG, New York Branch, as Documentation Agent, as amended from time to time. "Total Commitment" means the aggregate amount of the Commitments. "Unmatured Event of Default" means an event which with the passage of time or the giving of notice, or both, would become an Event of Default. "Voting Stock" means capital stock of Borrower having voting power under ordinary circumstances to elect directors of Borrower. "Withdrawal Liability" means, as of any determination date, the aggregate amount of the liabilities, if any, pursuant to Section 4201 of ERISA if the Borrower or any ERISA Affiliate made a complete withdrawal from all Plans and any increase in contributions pursuant to Section 4243 or ERISA. SECTION 2 THE CREDIT 2.1 The Commitments. From time to time, during the Availability Period, --------------- each Bank severally agrees to lend to Borrower in U. S. Dollars the amount set forth opposite such Bank's -9- name on Schedule 1 hereto, subject to reduction of such amount at Borrower's option, pursuant to Sections 3.5 and 3.6. Each Bank shall make available to Borrower Base Rate Loans and Eurodollar Loans up to the amount of such Bank's Commitment. 2.2 The Loans. Each Loan shall be a Base Rate Loan or a Eurodollar Loan --------- and shall be in U. S. Dollars. Each Loan shall be in the minimum amount of $5,000,000 with any additional amounts in integral multiples of $1,000,000. This is a revolving credit, and Borrower may, during the Availability Period, reborrow amounts repaid or prepaid. No Loan nor any part of any Loan shall be repaid except at the times and in the manner expressly provided herein. 2.3 Requests for Base Rate and Eurodollar Loans. Each Base Rate Loan and ------------------------------------------- Eurodollar Loan shall be made upon irrevocable written or telephonic notice, confirmed promptly in writing, substantially in the form of Exhibit A hereto, by --------- Borrower to Administrative Agent received by Administrative Agent not later than 9:00 a.m. California time not less than three (3) Eurodollar Banking Days prior to the Borrowing Date (which must be a Eurodollar Banking Day) of a Eurodollar Loan and not later than 9:00 a.m. California time on the proposed Borrowing Date (which must be a Business Day) of a Base Rate Loan. Upon receipt of a request for a Base Rate Loan and Eurodollar Loan, Administrative Agent shall promptly notify the Banks of the amount, the Interest Period(s), if applicable, and the Borrowing Date requested by Borrower. After giving effect to any borrowing of Eurodollar Loans or any conversion or continuation of Eurodollar Loans, there shall not be more than 10 different Interest Periods for Eurodollar Loans in the aggregate at any time. 2.4 Limitations on Borrowing. Borrower may not request any Loans pursuant ------------------------ to Section 2.3 at any time that any amount is available to be borrowed under the 364-Day Credit Agreement or the Multi-Year Credit Agreement; provided that -------- Borrower may request Loans hereunder if it simultaneously requests the maximum amount available under the 364-Day Credit Agreement and the Multi-Year Agreement. 2.5 Interest and Principal on Base Rate Loans. Subject to Section 2.11(f) ----------------------------------------- herein, the outstanding Principal Amount of each Base Rate Loan shall bear interest until payment is due in full (computed daily on the basis of a 365 or 366, as the case may be, day year and actual days elapsed) at the rate per annum equal to the Base Rate. Borrower shall pay interest on each Base Rate Loan on each Interest Payment Date for the interest accruing since the previous Interest Payment Date on such Base Rate Loan. Borrower shall repay in full the Principal Amount of each Base Rate Loan on the Termination Date or as provided in Section 2.10(c). 2.6 Interest and Principal on Eurodollar Loans. (a) Subject to Section ------------------------------------------ 2.11(f) herein, the outstanding Principal Amount of each Eurodollar Loan shall bear interest until payment is due in full (computed daily on the basis of a three hundred sixty (360) day year and actual days elapsed) at a rate per annum equal to the Eurodollar Rate plus the Applicable Amount. Borrower shall pay ---- interest on each Eurodollar Loan on each Interest Payment Date for such Eurodollar Loan. Borrower shall repay in full the Principal Amount of each Eurodollar Loan on the last day of the Interest Period for such Eurodollar Loan or as provided in Section 2.10(c). (b) If any Reference Bank's Commitment shall terminate (otherwise than on termination of all the Commitments), or for any reason whatsoever the Reference Bank shall -10- cease to be a Bank hereunder, that Reference Bank shall thereupon cease to be a Reference Bank, and the Eurodollar Rate shall be determined on the basis of the rates as notified by the remaining Reference Banks. Each Reference Bank shall use its best efforts to furnish quotations of rates to the Administrative Agent as contemplated hereby. If any of the Reference Banks shall be unable or otherwise fails to supply such rates to the Administrative Agent upon its request, the rate of interest shall be determined on the basis of the quotations of the remaining Reference Banks or Reference Bank. 2.7 [Intentionally omitted.] 2.8 Loan Accounts. Each Bank shall open and maintain on its books one or ------------- more loan accounts in Borrower's name. Each loan account shall show (without duplication) as debits thereto each Bank's portion of each Base Rate Loan and/or Eurodollar Loan and as credits thereto all Base Rate Loan and/or Eurodollar Loan payments received by such Bank for the account of such Bank and applied to principal so that the balance of the loan account(s) at all times reflect the principal amount due each Bank from Borrower as Base Rate Loans and Eurodollar Loans. All entries in said books shall be presumptive evidence of the making of each Base Rate Loan and Eurodollar Loan, the obligation of Borrower to repay each Base Rate Loan and Eurodollar Loan, and all payments received and disbursed by such Bank. Borrower agrees that if, in the opinion of any Bank, a promissory note or other evidence of debt is required or appropriate to reflect or enforce any Loans outstanding to or to be made by such Bank, then Borrower shall promptly execute and deliver to such Bank one or more promissory notes payable to such Bank to evidence the Loans outstanding to such Bank under this Agreement from time to time, together with such documents as such Bank may reasonably request to evidence the due authorization, execution, delivery and enforceability of such notes. If any notes are issued hereunder, Administrative Agent and Borrower may treat the payee of that note as the owner of such note for all purposes. 2.9 [Intentionally omitted.] 2.10 Conversion of Loans Between Eurodollar Loans and Base Rate Loans and -------------------------------------------------------------------- Conversion of Interest Periods of Eurodollar Loans. (a) On any Eurodollar - -------------------------------------------------- Banking Day Borrower may convert on a pro rata basis among the Banks any outstanding Base Rate Loans or Eurodollar Loans into any other type of Loan available to Borrower hereunder, or Borrower may change the Interest Period of any Eurodollar Loan to another Interest Period available under this Agreement, subject to the following limitations: (i) No conversion of any Eurodollar Loan into any other Loan and no conversion of the Interest Period of any Eurodollar Loan may be made except on the last day of an Interest Period with respect thereto; and (ii) Any conversion shall be preceded by an irrevocable written or telephonic notice from Borrower that it elects such conversion, which notice shall be received by Administrative Agent at least three (3) Eurodollar Banking Days prior to the date requested for such conversion from or into a Eurodollar Loan or conversion of the Interest Period of a Eurodollar Loan. -11- (b) Banks shall not be obligated to make or continue any Eurodollar Loan when any Event of Default has occurred and is continuing, but any outstanding Eurodollar Loan shall be automatically converted to a Base Rate Loan on the last day of the Interest Period for which a Eurodollar Rate was determined by Administrative Agent following occurrence of such Event of Default, and, unless Section 2.11(f) is applicable, Borrower shall be obligated to pay interest at the Base Rate from the date any Loan is so converted until such Loan is repaid in full regardless of the date when Administrative Agent obtains knowledge of such Event of Default. (c) Each conversion of a Loan into a Base Rate Loan or a Eurodollar Loan, as the case may be, shall be effected by each Bank, on behalf of Borrower, as applicable, by making a simultaneous payment of the relevant Eurodollar Loan, or Base Rate Loan, as the case may be, from the proceeds of the new Loans, procedures with respect thereto to be governed by the provisions of Section 2.3, except that disbursement shall be made by means of such payment rather than directly to Borrower to the extent applicable with respect to each Bank. (d) If upon the expiration of any Interest Period applicable to Eurodollar Loans, Borrower has failed to select a new Interest Period to be applicable thereto, or if any Event of Default or Unmatured Event of Default shall then exist, Borrower shall be deemed to have elected to convert such Eurodollar Loans into Base Rate Loans effective as of the expiration date of such current Interest Period. 2.11 Disbursements and Payments. (a) Each Base Rate Loan and Eurodollar -------------------------- Loan shall be made on a pro rata basis by Banks, and each Bank's portion of each Loan shall be determined by application of its Normal Percentage. Each Bank's interest in each Loan and each payment to such Bank under this Agreement shall be for the account of such Bank's Lending Office. (b) Each Loan and each payment of principal, interest and other sums under this Agreement shall be made in immediately available funds (or such other funds as Administrative Agent may require) at Bank of America's Agency Administrative Services-West, 1850 Gateway Blvd., Concord, California 94520, ABA # 111000012, Acct No. 3750836479, Ref: Hughes Electronics Corporation or such other office designated by Administrative Agent from time to time. (c) Each Bank agrees it will make the funds which it is to advance hereunder available to Bank of America's Agency Administrative Services-West, 1850 Gateway Blvd., Concord, California 94520, ABA # 111000012, Acct No. 3750836479 , Ref: Hughes Electronics Corporation or such other office designated by Administrative Agent from time to time not later than 11:00 a.m. California time on the Borrowing Date, and Administrative Agent will thereupon promptly advance to Borrower the amount so received from Banks. (d) Payment of all sums under this Agreement shall be made by Borrower to Administrative Agent, and the latter shall promptly distribute to each Bank its share of such payments. Each payment by Borrower shall be made without setoff or counterclaim and not later than 11:00 a.m. California time on the day such payment is due. All sums received after such time shall be deemed received on the next Business Day. -12- (e) If Administrative Agent makes available to Borrower an amount due from any Bank which such Bank fails to make available to Administrative Agent, or if Administrative Agent makes available to any Bank an amount due from Borrower which Borrower fails to make available to Administrative Agent, Borrower or such Bank, as the case may be, shall, on demand, refund such amount to Administrative Agent, together with interest thereon for the period during which such amount was available to Borrower or such Bank, as the case may be, at the Federal Funds Rate. (f) Any sum of principal or interest payable by Borrower hereunder if not paid when due shall bear interest (payable on demand) from its due date until payment in full (computed daily on the basis of a 365 or 366, as the case may be, day year and actual days elapsed) at a rate per annum equal to the Default Rate. 2.12 Facility Fee. Borrower shall pay Administrative Agent for the ------------ account of the Banks, a facility fee at the rate per annum equal to the Applicable Amount therefor on the Total Commitment (without regard to the amount of Loans outstanding at any time hereunder and without giving effect to any reduction pursuant to Section 2.1(c)) during the Availability Period; provided, -------- however, following any reduction in the Total Commitment pursuant to Section 3.5 - ------- or 3.6 (but not a reduction pursuant to Section 2.1(c)) the computation of the facility fee shall be based upon such reduced Total Commitment as of the effective date of such reduction. The facility fee shall be computed on a calendar quarter basis. The facility fee shall be calculated on the basis of a 360-day year and actual days elapsed, which results in a higher fee than if a 365/366-day year were used, and shall be payable on the 10th day of each January, April, July and October (for the facility fee accrued during the previous calendar quarter) and on the Termination Date. 2.13 Prepayments and Reductions in Total Commitment. ---------------------------------------------- (a) Mandatory Prepayments and Commitment Reductions Due to Issuance of ------------------------------------------------------------------ Debt Securities. On the date of receipt by Borrower of the cash proceeds (any - --------------- such proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses, being "Net Securities Proceeds") from the issuance of any debt securities of Borrower in a public offering or a transaction consummated under Rule 144A promulgated by the Securities and Exchange Commission which transaction contains the right of the purchasers to register securities issued under such offering pursuant to the Securities Act of 1933 or to exchange such securities for securities issued under the Securities Act of 1933, Borrower shall prepay the Loans (up to the outstanding principal amount thereof) and the Total Commitment shall be permanently reduced, in each case in an aggregate amount equal to such Net Securities Proceeds, and the Total Commitment shall be terminated if such Net Securities Proceeds are equal to or greater than the Total Commitment. (b) Calculations of Net Proceeds Amount. Concurrently with any ----------------------------------- prepayment of the Loans and/or reduction of the Total Commitment pursuant to Section 2.13(a), Borrower shall deliver to Administrative Agent an officers' certificate signed by Borrower's treasurer or an assistant treasurer demonstrating the calculation of the amount of the applicable Net Securities Proceeds that gave rise to such prepayment and/or reduction. -13- (c) Application of Prepayments to Base Rate Loans and Eurodollar Loans. ------------------------------------------------------------------ Any prepayment of Loans made under Section 2.13(a) shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Loans, in each case in a manner which minimizes the amount of any payments required to be made by Borrower pursuant to Section 3.4. (d) Borrower hereby agrees to prepay any outstanding Loans hereunder in full before it prepays on any optional basis any outstanding loans under the 364-Day Credit Agreement or the Multi-Year Credit Agreement. SECTION 3 PAYMENT OF COSTS AND REDUCTION OF THE COMMITMENT 3.1 Indemnification Upon Failure to Pay Eurodollar Loan. If Borrower --------------------------------------------------- makes any payment of principal with respect to any Eurodollar Loan on a day other than the last day of the then current Interest Period applicable to such Loan (including without limitation any payment upon reduction of the Commitments) or fails to borrow, continue, convert, pay or prepay its Eurodollar Loan on a date designated to Administrative Agent in a notice pursuant to this Agreement (if such failure does not result from the application of Sections 4.1 or 4.2), Borrower shall reimburse each Bank within 15 days after receipt of written demand for any loss incurred by it as a result of the timing of such payment or non-borrowing not reflected in the Eurodollar Rate, including without limitation any loss incurred in liquidating or employing deposits from third parties and loss of profit for the period after such payment or non-borrowing. A certificate of such Bank setting forth the amounts reasonably necessary so to reimburse it in respect of any loss shall be conclusive and binding absent manifest error. 3.2 Increased Costs. (a) If after the date hereof, any applicable law, --------------- rule or regulation or any change therein or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof or compliance by any Bank (or its Lending Office) with any request or directive of any such authority, central bank or comparable agency, whether or not having the force of law, shall impose, modify or deem applicable: (i) any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit, compulsory loan or similar requirements against assets, commitments or deposits or other liabilities with, of or for the account of, or credit extended by, or any acquisition of funds by or for the account of any Bank or its Lending Office or the London interbank market or any other condition affecting its obligations to make the Loans to Borrower hereunder; (ii) any capital or similar requirements against (or against any class of or change in or the amount of) assets or liabilities of, or commitments or extensions of credit by, such Bank; each Bank which is so affected shall give prompt notice to Borrower describing such reserves or requirements at least four Business Days prior to the date such Bank will begin to implement -14- such additional charges with respect to Borrower. If the result of any of the foregoing is to increase the cost or reduce the profit to such Bank (or its Lending Office) under this Agreement by an amount deemed by such Bank to be material, then, within 15 days after written demand by such Bank, Borrower will pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost incurred or reduction in profit suffered by such Bank. Such Bank will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not be otherwise disadvantageous to such Bank in the sole discretion of such Bank. A certificate of such Bank setting forth the basis for determining such additional amount or amounts necessary to compensate the Bank shall be conclusive in the absence of manifest error. (b) Without limiting the effect of the foregoing (but without duplication), upon any Bank's prior written request, Borrower shall pay to such Bank on the last day of each Interest Period, so long as such Bank may be required to maintain reserves against "eurocurrency liabilities" under Regulation D (as at any time amended) of the Board of Governors of the Federal Reserve System, as additional interest on the unpaid principal amount of each Eurodollar Loan by such Bank outstanding during such Interest Period, an additional amount (determined by such Bank and notified to Borrower in writing) up to but not exceeding such amount as would, together with payments of interest on such Eurodollar Loan for such Interest Period, result in the receipt by such Bank of total interest on such Eurodollar Loan, for such Interest Period at a rate determined by such Bank to be equal to the sum of: (i) the Eurodollar Rate divided by a sum equal to (a) 1 minus (b) the rate (expressed as a decimal) of such reserves required by Regulation D, plus (ii) the Applicable Amount for Eurodollar Loans. In determining the additional amount payable for an Interest Period pursuant to this Section, such Bank shall take into account any transitional adjustment or phase-in provisions of such reserve requirements applicable during such Interest Period, which would reduce the reserve requirement otherwise applicable to eurocurrency liabilities during such Interest Period; provided, however, each Bank in its sole discretion may determine the allocation of reserve requirements to its Eurodollar Loans. Each such determination made by such Bank, and each such notification by such Bank to Borrower under this Section, shall be conclusive as to the matters set forth therein in the absence of manifest error. 3.3 Taxes. All payments or reimbursements under this Agreement and any ----- instrument or agreement required hereunder shall be made without setoff or counterclaim and free and clear of and without deduction for any and all present and future Taxes. Borrower agrees to cause all such Taxes to be paid on behalf of any Bank or Administrative Agent directly to the appropriate Governmental Authority. If Borrower is legally prohibited from complying with this subsection, payments due to such Bank or Administrative Agent under this Agreement and any instrument or agreement required hereunder shall be increased so that, after provisions for Taxes and all Taxes on such increase, the amounts received by such Bank or Administrative Agent will be equal to the amounts required under this Agreement and any instrument or agreement required hereunder as if no Taxes were due on such payments. Borrower shall indemnify each Bank and Administrative Agent for the full amount of Taxes payable by such -15- Bank or Administrative Agent and any liabilities (including penalties, interest and expenses) arising from such Taxes within 30 days from any written demand by such Bank. Borrower shall provide evidence that all applicable Taxes have been paid to the appropriate taxing authorities by delivering to Administrative Agent official tax receipts or notarized copies or other evidence thereof satisfactory to Administrative Agent, within 90 days after the due date for such Tax payment. Such Bank will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such payment or reimbursement and will not be otherwise disadvantageous to such Bank in the sole discretion of such Bank. 3.4 Prepayment. Upon the irrevocable written notice of Borrower received ---------- by Administrative Agent by 11:00 a.m. California time at least one Business Day prior to the prepayment of a Base Rate Loan and at least five Eurodollar Banking Days prior to the prepayment of a Eurodollar Loan, Borrower may prepay any Eurodollar Loan or Base Rate Loan; but such prepayment shall be in an amount of at least $5,000,000 or multiple integrals of $1,000,000 in excess thereof. The notice of prepayment shall specify the date of the prepayment, the amount of the prepayment and the Loan to be prepaid. Each such prepayment shall be made on the date specified and, in the case of a prepayment of any Eurodollar Loan shall be accompanied by the payment of accrued interest on the amount prepaid. Subject to compliance with the foregoing procedures, Base Rate Loans may be prepaid at any time without cost or penalty of any kind. If Borrower elects to prepay a Eurodollar Loan, Borrower shall, on demand by each Bank, pay such Bank the amount (if any) by which (a) the additional interest which would have been payable on the amount prepaid on such Bank's portion of such Loan had it not been paid until the last day of the Interest Period of such Loan exceeds (b) the interest which would have been recoverable by such Bank by placing such prepaid amount on deposit in the offshore Dollar interbank markets for a period starting on the date on which it was prepaid and ending on the last day of the Interest Period for such Loan. 3.5 Pro Rata Reduction of Commitments by Borrower. Borrower may, upon --------------------------------------------- five Business Days' prior written notice (which notice shall be irrevocable) to Banks through Administrative Agent, reduce the Total Commitment on a pro rata basis among the Banks. Such a reduction shall be in an amount of at least $5,000,000 or multiple integrals of $1,000,000 in excess thereof. Borrower shall, on the effective date of each such reduction, repay to each Bank through Administrative Agent that portion of each Loan which exceeds the amount of each Bank's Commitment as reduced, together with accrued interest on the amount paid and accrued facility fees subject to such reduction. After the effective date of each reduction, the Banks' obligations under this Agreement shall be based on the reduced Commitments. 3.6 Reduction of One Bank's Commitment by Borrower. If the amount of any ---------------------------------------------- payment to be made to or for the account of any Bank is increased under Section 3.3 or any Bank makes a claim under Section 3.2, then: (a) Borrower may, within 60 days after the notice thereof and by not less than five Business Days' written notice to Administrative Agent, cancel such Bank's Commitment, whereupon such Bank shall cease to be obligated to participate in further Loans hereunder and its Commitment shall be reduced to the amount of its outstanding Loans until such Loans are repaid by Borrower either on the Principal Repayment Date for such Loans or pursuant to Section 3.6(b), at which time such Bank's Commitment shall be reduced to zero; -16- (b) if Borrower cancels such Bank's Commitment pursuant to clause (a) above and if Borrower so elects by written notice to Administrative Agent given at the same time as the notice referred to in clause (a) above, Borrower shall prepay such Bank's portion of each outstanding Loan together with any accrued interest thereon plus all costs and expenses (including break and funding costs in connection with the relending, reborrowing, funding or other employing of funds) incurred by such Bank as a result of such cancellation or prepayment on a date other than the Principal Repayment Date for such Loan; and 3.7 Notice of Reductions. Each notice of reduction or prepayment given -------------------- pursuant to Section 3.4, 3.5 or 3.6 shall be irrevocable, shall specify the date upon which such reduction or prepayment is to be made and, in the case of a notice of prepayment, shall obligate Borrower to make such prepayment on such date. Borrower may not give a notice of reduction of a part of the Commitment pursuant to Section 3.6 at any time prior to the date so specified in any previous such notice. 3.8 Designation of Replacement Bank. If the Commitment of any Bank is ------------------------------- cancelled by Borrower pursuant to Section 3.6 or if any Bank terminates its Commitment with respect to Eurodollar Loans pursuant to Section 4.2, Borrower, with the consent of Administrative Agent, may designate an Eligible Assignee (or, if it deems appropriate, more than one Eligible Assignee) acceptable to Administrative Agent to act as a Bank hereunder and upon execution of a written agreement in form satisfactory to Administrative Agent by such Eligible Assignee in which it agrees to abide by all of the terms, conditions and obligations applicable to a Bank herein and to have a Commitment as specified in such agreement, such Eligible Assignee shall be deemed a Bank hereunder to the same extent as if it were a signatory hereto and, thereafter, such Eligible Assignee shall for all purposes be considered a "Bank" hereunder. 3.9 Effect of Reduction of Commitment. If, at any time: --------------------------------- (a) the Commitment of any Bank is reduced to zero in accordance with the terms of this Agreement; (b) all indebtedness and other amounts owed to such Bank by Borrower hereunder or in connection herewith have been satisfied in full; and (c) such Bank is under no further actual or contingent obligation hereunder, then such Bank shall cease to be a party hereto and a Bank for the purposes hereof; provided, however, that the obligations of Borrower under Sections 3.1, -------- ------- 3.2, 3.3, 11.14, 11.15 and 11.16 shall survive the cancellation of the Commitment and the termination of this Agreement. 3.10 Accrued Fees. On the date of the cancellation of any portion of the ------------ Total Commitment in accordance with Section 3.5 or of any Bank's Commitment under Section 3.6, all accrued facility fees for such portion of the Total Commitment or of such Bank's Commitment shall be paid in full by Borrower. 3.11 Survival. The agreements and obligations of Borrower in this Section -------- 3 shall survive the termination of this Agreement. -17- SECTION 4 CHANGE IN CIRCUMSTANCES AFFECTING LOANS 4.1 Inability to Determine Eurodollar Rate. If any Reference Bank -------------------------------------- determines (which determination shall be made in good faith and shall be conclusive and binding upon Borrower) that (a) by reason of circumstances then affecting the Eurodollar interbank market, adequate and reasonable means do not or will not exist for ascertaining the interest rate applicable to any Eurodollar Loans, or (b) Dollar deposits in the relevant amounts and for the relevant Interest Period are not available to the Banks in the Eurodollar interbank market, then it shall notify the Administrative Agent who shall forthwith give written notice of such determination to Borrower and each Bank at least one Business Day prior to the first day of any Interest Period so affected; whereupon, until Administrative Agent shall notify Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Eurodollar Loans shall be suspended and (ii) Borrower shall repay in full, without premium or penalty, the then outstanding principal amount of the Eurodollar Loans, together with accrued interest thereon, on the last day of the then current Interest Period pursuant to the next sentence. Unless Borrower notifies Administrative Agent to the contrary within one Business Day after receiving a notice from Administrative Agent pursuant to this Section, Borrower shall, concurrently with prepaying the Eurodollar Loans pursuant to this Section, be deemed automatically without any further notice to Administrative Agent or the Banks to have requested and received Base Rate Loans in an equal principal amount from the Banks, the proceeds of which are deemed to have been used to repay the other Loans. 4.2 Illegality. If, after the Effective Date, the introduction of or any ---------- change in any applicable law, rule or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance by any Bank with any request or directive (whether or not having the force of law) of any such authority shall make it unlawful or impossible for such Bank (or its Lending Office) to make, maintain or fund its Eurodollar Loans, such Bank shall forthwith give written notice thereof to Administrative Agent and to Borrower. Before giving any notice pursuant to this Section, such Bank shall designate a different Lending Office if such designation will avoid the need for giving such notice and will not be otherwise disadvantageous to such Bank in the sole judgment of such Bank. Upon receipt of such notice (a) if such Bank has received a request with respect to Eurodollar Loans and has not yet made such Loan, a Base Rate Loan shall be deemed to have been designated without any further notice; (b) all Loans which would otherwise be made by such Bank as Eurodollar Loans shall be made instead as Base Rate Loans; and (c) Borrower shall prepay in full, without premium or penalty, the then outstanding principal amount of such Bank's Eurodollar Loans, together with accrued interest, on either (i) the last day of the then-current Interest Period if such Bank may lawfully continue to fund and maintain such Eurodollar Loans, to such day or (ii) immediately if such Bank may not lawfully continue to fund and maintain such Eurodollar Loans to such day together with an amount, if any, calculated as set forth in the last sentence of Section 3.4. Concurrently with prepaying each such Eurodollar Loan Borrower shall borrow a Base Rate Loan from such Bank in an amount equal to the principal amount of such Bank's Eurodollar Loans, the proceeds of which are deemed to have been used to repay such Bank's Eurodollar Loans. If circumstances subsequently change so that such Bank is not further affected, and no Eligible Assignee has been appointed pursuant to Section 3.8, such Bank -18- shall so notify Borrower and Administrative Agent and such Bank's obligation to make and continue Eurodollar Loans shall be reinstated upon written request of Borrower. SECTION 5 CONDITIONS PRECEDENT 5.1 Conditions Precedent to Signing Date. The occurrence of the Signing ------------------------------------ Date is subject to the condition that on the Signing Date this Agreement, duly executed and delivered by the parties hereto, shall have been delivered to Administrative Agent with counterparts for each Bank and in form and substance satisfactory to Banks. 5.2 Conditions Precedent to Effective Date. The obligation of Banks to -------------------------------------- make the initial Loans hereunder is subject to the condition that on the Effective Date there shall have been delivered to the Administrative Agent with counterparts for each Bank: (a) Notes, if any, requested by any Bank pursuant to Section 2.8 prior to the Effective Date, duly executed and delivered by the Borrower. (b) The favorable written opinions, dated the Effective Date, of the General Counsel or Assistant General Counsel of Borrower in the form set out in Exhibit E. - --------- (c) Certificate of the Secretary or an Assistant Secretary of Borrower dated the Effective Date as to (i) the Certificate of Incorporation and the By- laws of Borrower, (ii) the resolution of the Board of Directors of Borrower or its Executive Committee in connection with this Agreement, and (iii) the incumbency and signatures of the person authorized to execute and deliver this Agreement and any other instrument, document or other agreement required hereunder on the Effective Date. (d) A certificate, which shall be true and correct, signed by a vice president of Borrower dated the Effective Date certifying: (i) that since June 30, 1999, there has been no Material Adverse Change; (ii) that the representations and warranties contained in this Agreement are true and correct in all material respects; (iii) that no event has occurred and is continuing or would result from the making of a Loan which constitutes or would constitute an Event of Default or an Unmatured Event of Default; and (iv) the Debt Ratings as of the Effective Date. (e) Certificate of Good Standing in relation to Borrower issued by the Secretary of the State of Delaware, dated not more than one month prior to the Effective Date. (f) A copy of press releases or other evidence of Borrower's Debt Ratings from both S&P and Moody's. (g) The Multi-Year Credit Agreement and the 364-Day Credit Agreement have become effective in accordance with their terms; (h) The Administrative Agent shall have received all fees payable to it and/or the Banks on the Effective Date under the Letter Agreement. -19- (i) Unless waived by Administrative Agent, Borrower shall have paid all Attorney Costs of Administrative Agent to the extent invoiced prior to or on the Closing Date, including such additional amounts of Attorney Costs as shall constitute its reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between Borrower and Administrative Agent). 5.3 Conditions Precedent to Loans. The obligation of Banks to disburse ----------------------------- each Loan (including the first Loan) is subject to the following conditions and by communicating a Loan Request Borrower is deemed to certify that: (a) Borrower's representations and warranties (excluding Section 6.6) contained in this Agreement and any other documents delivered pursuant hereto are true and correct in all material respects on the date of such Loan Request; (b) the financial statements delivered to Administrative Agent by Borrower pursuant to Section 7.5 on the date most nearly preceding the Loan Request present fairly the financial position and results of operations and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such statements relate, (subject, in the case of unaudited financial statements to year end adjustments); and (c) no Event of Default or Unmatured Event of Default has occurred and is continuing except such Events of Default or Unmatured Events of Default as have been expressly waived by or on behalf of the Banks. SECTION 6 REPRESENTATIONS AND WARRANTIES 6. Borrower represents and warrants that as of the Effective Date: 6.1 Authority of Borrower. Borrower (a) is a corporation duly organized --------------------- and existing under the laws of the State of Delaware, with its principal place of business in Los Angeles County, California, (b) has the corporate power to own its property and carry on its business as now being conducted, (c) is duly qualified and authorized to do business, and is in good standing in every state, country or other jurisdiction where the failure to be so qualified, authorized and in good standing would have a material adverse effect on Borrower, (d) has full power and authority to borrow the sums provided for in this Agreement, to execute, deliver and perform this Agreement and any instrument or agreement required hereunder, and to perform and observe the terms and provisions hereof and thereof, (e) has taken all corporate action on the part of Borrower, its directors or stockholders, necessary for the authorization, execution, delivery and performance of this Agreement, and any instrument or agreement required hereunder on the date hereof, (f) requires no consent or approval of any trustee or holder of any indebtedness or obligation of Borrower to enter into, deliver or perform its obligations under this Agreement and the Notes, and (g) requires no consent, permission, authorization, order or license of any Governmental Authority in connection with the execution and delivery and performance of this Agreement and any instrument or agreement required hereunder, or any transaction contemplated hereby, except as may have been obtained and certified copies of which have been delivered to Banks through Administrative Agent. 6.2 Binding Obligations. This Agreement is the legal, valid and binding ------------------- obligation of Borrower, enforceable against it in accordance with its terms, and any instrument or agreement -20- required hereunder, when executed and delivered, will be similarly valid, binding and enforceable. 6.3 Incorporation of Restricted Subsidiaries. Each Restricted Subsidiary ---------------------------------------- of Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and, to the best of Borrower's knowledge, is duly licensed or qualified as a foreign corporation in all jurisdictions where the failure to be so qualified, authorized and in good standing would have a material adverse effect on Borrower and its Restricted Subsidiaries taken as a whole. 6.4 No Contravention. There is no charter, by-law, or capital stock ---------------- provision of Borrower and no provision of any indenture or material agreement, written or oral, to which Borrower is a party or under which Borrower is obligated, nor is there any statute, rule or regulation, or any judgment, decree or order of any court or agency binding on Borrower which would be contravened by the execution, delivery and performance of this Agreement, or any instrument or agreement required hereunder, or by the performance of any provision, condition, covenant or other term hereof or thereof. 6.5 Notices. Except as previously disclosed in writing to Administrative ------- Agent, no event has occurred which, to the best of its knowledge, would require Borrower to notify Administrative Agent and the Banks pursuant to Section 7.3 hereof. 6.6 Financial Statements. The audited consolidated financial statements -------------------- dated December 31, 1998 and the unaudited consolidated financial statements for the six months ended June 30, 1999 furnished by Borrower to the Administrative Agent and Banks, present fairly the financial position and results of operation and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal periods to which such statements relate, and such financial statements were prepared in accordance with GAAP. Since June 30, 1999, there has been no Material Adverse Change. The Borrower and its Subsidiaries did not have any contingent obligations, liabilities for taxes or other outstanding financial obligations at June 30, 1999 which are material in the aggregate for Borrower and its Subsidiaries, taken as a whole, except as disclosed in such unaudited consolidated financial statements. 6.7 ERISA. Based upon ERISA and the regulations and published ----- interpretations thereunder, the Plans of Borrower and its Subsidiaries and, to the knowledge of Borrower, the Plans of any other ERISA Affiliates, are in material and substantial compliance in all material respects with the applicable provisions of ERISA and Borrower and its Subsidiaries are in compliance with such Plans in all material respects. No Reportable Event which has or could be reasonably be expected to result in termination thereof by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer such Plan has occurred and is continuing with respect to any Plan. 6.8 Regulation U; Investment Company Act. Borrower is not engaged ------------------------------------ principally, or as one of its important activities, in the business of extending credit for the purposes of purchasing or carrying any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System; and neither Borrower nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940. -21- 6.9 Taxes. Borrower has filed all federal and state tax returns which to ----- the knowledge of the financial officers of Borrower are required to have been filed, and has paid prior to delinquency all taxes that have become due pursuant to said returns or pursuant to any assessment, except as are being contested in good faith by appropriate proceedings and as to which adequate reserves have been provided on the books of Borrower in accordance with GAAP. 6.10 Insurance. Borrower and its Restricted Subsidiaries maintain --------- insurance with responsible insurance companies, in such amounts and against such risks as is customarily carried by owners of similar businesses and property, including protection against loss of use and occupancy, to the extent such insurance is reasonably available at commercially reasonable rates, and it will furnish Administrative Agent, upon written request, with full information as to the insurance carrier; provided, however, that Borrower and its Restricted -------- ------- Subsidiaries may self insure to the extent they deem prudent. 6.11 Liens. The properties and assets of Borrower and its Restricted ----- Subsidiaries, real, personal and mixed, are not subject to any Liens, except for Liens permitted by this Agreement. 6.12 Litigation. Except as disclosed in writing to the Banks prior to the ---------- Signing Date, no litigation, investigation or proceeding of or before an arbitrator or Governmental Authority is pending or, to the knowledge of Borrower after due and diligent investigation, threatened by or against Borrower or any of its Subsidiaries or against any of their properties or revenues which could reasonably be expected to cause a Material Adverse Change. 6.13 Environmental Compliance. Borrower and its Subsidiaries each conduct ------------------------ in the ordinary course of business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof Borrower has reasonably concluded that such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to cause a Material Adverse Change. 6.14 Year 2000. Borrower has (a) completed a review and assessment of all --------- areas within its and each of its Subsidiaries' business and operations (including those affected by customers and vendors) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications and devices containing imbedded computer chips used by Borrower or any of its Subsidiaries may be unable to recognize and perform properly date- sensitive functions involving certain dates prior to and any date after December 31, 1999), (b) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (c) to date, implemented that plan in accordance with that timetable. Based on the foregoing, Borrower believes that all computer applications and devices containing imbedded computer chips that are material to its or any of its Subsidiaries' business and operations are reasonably expected on a timely basis to be able to perform properly date- sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure to do so could not reasonably be expected to cause a Material Adverse Change. 6.15 Disclosure. No written statement (or oral statement made by senior ---------- executives of Borrower at the bank meeting held on November 3, 1999, it being understood that any -22- projections contained in such statements are not to be viewed as facts but were based on good faith estimates and assumptions believed by Borrower to be reasonable), written information, report, representation, or warranty made by Borrower in this Agreement or furnished to Administrative Agent or any Bank in connection with this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading. SECTION 7 AFFIRMATIVE COVENANTS OF BORROWER Borrower covenants and agrees that so long as the credit hereby granted shall remain available in whole or in part or until the full and final payment of all indebtedness incurred hereunder, unless Majority Banks waive compliance in writing: 7.1 Use of Proceeds of Loans. It will use the proceeds of the Loans made ------------------------ by Banks to Borrower hereunder for the repayment of Commercial Paper or other indebtedness of Borrower existing as of the Effective Date and for its general working capital requirements, including acquisition and improvement of plant, property and equipment and acquisitions, and other lawful corporate purposes. 7.2 Management of Business. It will manage its business and conduct its ---------------------- affairs such that the representations and warranties contained in Sections 6.1 through 6.3, 6.7 through 6.9 and 6.13 and 6.14 remain true and correct at all times during the Availability Period. 7.3 Notice of Certain Events. It will, and it will cause each of its ------------------------ Restricted Subsidiaries to, give prompt written notice to Administrative Agent (who shall promptly notify the Banks) of: (a) all Events of Default or Unmatured Events of Default under any of the terms or provisions of this Agreement; (b) any event of default under any other agreement, contract, indenture, document or instrument entered, or which may be entered, into by it that could, if settled unfavorably, result in a Material Adverse Change; (c) all material changes in senior management publicly announced; (d) all litigation, arbitration or administrative proceedings involving Borrower or any of its Subsidiaries which could in the reasonable opinion of Borrower be expected to result in a Material Adverse Change; (e) any other matter which has resulted in, or might in the reasonable opinion of Borrower result in, a Material Adverse Change; (f) concurrently with the public announcement thereof, any proposed Merger or Disposition affecting any Restricted Subsidiary; (g) any change in any Debt Rating by S&P or Moody's; and -23- (h) promptly upon any discovery or determination that any computer application that is material to Borrower's or any of its Subsidiaries' business and operations will not be Year 2000 compliant on a timely basis, except to the extent that such failure could not reasonably be expected to cause a Material Adverse Change. 7.4 Records. It will, and it will cause each of its Restricted ------- Subsidiaries to, keep and maintain full and accurate accounts and records of its operations according to GAAP and will permit Administrative Agent, and its designated officers, employees, agents, and representatives, to have access thereto and to make examination thereof at all reasonable times, to make audits, and to inspect and otherwise check its properties, real, personal and mixed; provided, however, that such examination and access shall be in compliance with - -------- ------- security and confidentiality requirements of all Governmental Authorities and, subject to Section 11.16, Borrower's corporate policies. 7.5 Information Furnished. It will furnish to Banks and Administrative --------------------- Agent: (a) Within 60 days after the close of each quarter, except for the last quarter of each fiscal year, its consolidated balance sheet as of the close of such quarter and its consolidated profit and loss statement and cash flow statement for that quarter and for that portion of the fiscal year ending with such quarter, all prepared in accordance with GAAP, and all certified by its Treasurer or an Assistant Treasurer as presenting fairly the financial position and results of operations and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such statements relate, subject to normal year-end adjustments. (b) Within 120 days after the close of each fiscal year, a complete copy of its annual financial statements, which statements shall include at least its consolidated balance sheet as of the close of such fiscal year and its consolidated profit and loss statement and cash flow statement for such fiscal year, prepared by Deloitte & Touche (or such other independent certified public accountants of recognized international standing selected by Borrower) in accordance with GAAP applied on a basis consistent with that of the previous year, and which statements shall include the opinion of such accountants, such opinion not to be qualified or limited because of any restricted or limited nature of examination made by such accountants or because of a "going concern" qualification. (c) Within 60 days after the close of each quarter except for the last quarter of each fiscal year, (and within 120 days after the close of each fiscal year) its certificate executed by Borrower's Treasurer or an Assistant Treasurer that (i) the representations and warranties set forth in Section 6 (with the exception of Section 6.6) are true and correct in all material respects; and (ii) no Event of Default or Unmatured Event of Default has occurred and is continuing except such Events of Default or Unmatured Events of Default as have been expressly waived by or on behalf of the Banks. (d) concurrently with the delivery of the financial statements referred to in clauses (a) and (b), a duly completed Compliance Certificate signed by --- --- Borrower's Treasurer or an Assistant Treasurer; -24- (e) promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to public securityholders of Borrower, and copies of all annual, regular, periodic and special reports and registration statements which Borrower may file or be required to file with the Securities and Exchange Commission under Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and not otherwise required to be delivered to Administrative Agent pursuant hereto; (f) Such other information concerning its affairs as Administrative Agent or Majority Banks may reasonably request. 7.6 Execution of Other Documents. It will promptly, upon demand by ---------------------------- Administrative Agent, execute all such additional agreements, documents and instruments in connection with this Agreement as Administrative Agent or Majority Banks may deem necessary. 7.7 ERISA. It will, and it will cause each of its Subsidiaries to: ----- (a) At all times, make prompt payment of contributions required to meet the minimum funding standard set forth in ERISA with respect to its Plans, except to the extent that waivers are granted by the appropriate Governmental Authority; (b) Notify Administrative Agent immediately of (i) any Reportable Event which could reasonably be expected to result in aggregate liability to Borrower and its Subsidiaries in excess of $75,000,000 and (ii) any other fact arising in connection with any of its Plans or a Plan of any ERISA Affiliate which has resulted, or could reasonably be expected to result, in termination thereof by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer such Plan, in each case together with a statement, if requested by Administrative Agent, as to the reasons therefor and the action, if any, which Borrower or such ERISA Affiliate proposes to take with respect thereto; and (c) Furnish to Administrative Agent, upon its written request, such information concerning any of its Plans as may be reasonably requested. 7.8 Administrative Agent's Fees. It will compensate Administrative Agent --------------------------- as set forth in the Letter Agreement. 7.9 Compliance with Law. It will, and will cause each of its Subsidiaries ------------------- to, comply with the requirements of all applicable laws, rules, regulations, and orders of any Governmental Authority, a breach of which would result in a Material Adverse Change, except where contested in good faith by appropriate proceedings diligently pursued. 7.10 Compliance with Agreements. Promptly and fully comply with all -------------------------- Contractual Obligations under all material agreements, indentures, leases and/or instruments to which any one or more of them is a party, except for any such ------ Contractual Obligations (a) the performance of which would cause an Event of Default, (b) then being contested by any of them in good faith by appropriate proceedings, or (c) if the failure to comply therewith could not reasonably be expected to cause a Material Adverse Change. -25- 7.11 Maintenance of Insurance. Maintain liability and casualty insurance ------------------------ as provided in Section 6.10. SECTION 8 NEGATIVE COVENANTS OF BORROWER 8. Borrower covenants and agrees that so long as the credit hereby granted shall remain available in whole or in part or until the full and final payment of all indebtedness incurred hereunder, unless Majority Banks waive compliance in writing: 8.1 Liens. ----- (a) Borrower will not, nor will it permit any Restricted Subsidiary to, issue, incur, guaranty or assume any indebtedness for money borrowed secured by a Lien upon any property or assets of Borrower or any Restricted Subsidiary or upon any shares of stock or indebtedness of any Restricted Subsidiary (whether such property, assets, shares of stock or indebtedness are now owned or hereafter acquired) without in any such case effectively providing concurrently with the issuance, incurrence, guarantee or assumption of any such indebtedness that the Commitments and Loans and any other obligations of Borrower to the Banks (together with, if Borrower shall so determine, any other indebtedness of Borrower or such Restricted Subsidiary ranking equally with the Commitments and Loans and such other obligations and then existing or thereafter created) shall be secured equally and ratably with or prior to such indebtedness by a Lien upon such property, assets, shares of stock or indebtedness, unless the aggregate amount of such indebtedness for money borrowed secured by such Liens, together with all other indebtedness for money borrowed of Borrower and its Subsidiaries which (if originally issued, incurred, guaranteed or assumed at such time) would otherwise be subject to the foregoing restrictions (but not including indebtedness for money borrowed permitted to be secured under sub-clauses (1) through (7) of Section 8.1(b)), does not at the time exceed 5% of Consolidated Adjusted Net Worth. (b) The above restrictions shall not apply to indebtedness of Borrower or any of its Restricted Subsidiaries secured by: (1) Liens existing as of the date hereof and listed in Exhibit D; --------- (2) Liens on property, assets, shares of stock or indebtedness of any corporation existing at the time such corporation becomes a Restricted Subsidiary; (3) Liens on property existing at the time of acquisition of such property by Borrower or a Restricted Subsidiary, or Liens to secure the payment of all or any part of the purchase price of property upon the acquisition of such property by Borrower or a Restricted Subsidiary or to secure any indebtedness incurred or guaranteed prior to, at the time of, or within 180 days after, the later of the date of acquisition of such property and the date such property is placed in service, for the purpose of financing all or any part of the purchase price thereof, or Liens to secure any indebtedness incurred or guaranteed for the purpose of financing the cost to Borrower or a Restricted Subsidiary of improvements to such acquired property; provided, however, that for purposes of this clause 3, -------- ------- (i) a satellite will be treated as a newly-acquired asset as of the date it is placed in service and -26- (ii) any satellite transponder acquired through the exercise of an early buy-out option shall be treated as a newly-acquired asset as of the date such option is exercised; (4) Liens securing indebtedness of a Restricted Subsidiary owing to Borrower or to another Restricted Subsidiary; (5) Liens on property of a corporation existing at the time such corporation is merged or consolidated with Borrower or a Restricted Subsidiary (in accordance with Section 8.2) or at the time of a sale, lease or other disposition of the properties of a corporation as an entirety or substantially as an entirety to Borrower or a Restricted Subsidiary; (6) Liens on property of Borrower or a Restricted Subsidiary in favor of the United States of America or any state thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any state thereof, or in favor of any other country, or any political subdivision thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such Liens; or (7) any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any Liens referred to in the foregoing sub-clauses (1) to (6), inclusively; provided, however, that -------- ------- the principal amount of indebtedness secured thereby shall not exceed the principal amount of indebtedness so secured at the time of the incurrence or guarantee thereof and that such extension, renewal or replacement shall be limited to all or a part of the property which secured the Lien so extended, renewed or replaced (plus improvements on such property). 8.2 Mergers, Liquidations and Sales of Assets. It will not, nor will it ----------------------------------------- permit any of its Restricted Subsidiaries to liquidate or dissolve or enter into any consolidation, merger, partnership, joint venture, syndicate, pool or other combination (collectively, the "Mergers") or convey, sell or lease all or substantially all of its assets or business or the stock or all or substantially all of the assets or business of a Restricted Subsidiary (collectively, "Dispositions"), except for: (a) mergers between Subsidiaries, or between Subsidiary and Borrower where Borrower is the surviving corporation; (b) mergers where Borrower is the surviving corporation; (c) transfers of assets from one Restricted Subsidiary to another Restricted Subsidiary or from any Restricted Subsidiary to Borrower; (d) sales, leases, transfers or assignments of operating rights, licenses or franchises in transactions which could not reasonably be expected to result in a Material Adverse Change; and (e) the Disposition of any Restricted Subsidiary; provided that both Debt -------- Ratings remain Investment Grade on the effective date of any such Disposition; -27- provided, however, no Disposition or Merger otherwise permitted by clauses (a) - -------- ------- through (e) above shall take place if before, or after giving effect to any such Disposition or Merger, an Event of Default or Unmatured Event of Default exists or would exist. 8.3 Defaults. It will not, nor will it permit any of its Restricted -------- Subsidiaries to, commit or do any act or thing which would constitute an event of default under any of the material terms or provisions of any other material agreement, contract, indenture, document or instrument executed, or to be executed by any of them, except those that may be contested in good faith and would not, if settled unfavorably, result in a Material Adverse Change. 8.4 Compliance with Regulations. Borrower will not engage principally, or --------------------------- as one of its important activities, in the business of extending credit for the purposes of purchasing or carrying any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System; and it will not use the proceeds of any Loan for the purpose, directly or indirectly, whether immediate, incidental or ultimate, (a) to purchase or carry, within the meaning of such Regulation U, any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock, unless done in strict compliance with such Regulation U and other applicable law and Borrower shall have executed and delivered to each Bank prior to such use a Form U-1 statement evidencing compliance with such Regulation U and such other documents relating thereto as Administrative Agent or any Bank shall request, or (b) in a manner which would violate, or result in a violation of, Regulation T, U, or X of the Board of Governors of the Federal Reserve System. 8.5 Financial Covenants. ------------------- (a) Shareholders' Equity. Borrower will not permit Shareholders' Equity as at the end of any fiscal quarter to be less than the sum of (i) $7,125,000,000, (ii) an amount equal to 50% of Borrower's consolidated net income (as determined in accordance with GAAP) earned in each fiscal quarter ending after December 31, 1998 (with no deduction for a net loss in any such fiscal quarter) and (iii) an amount equal to 50% of the aggregate increase in Shareholders' Equity after December 31, 1998 by reason of the issuance of capital stock of Borrower (including upon any conversion of debt securities of Borrower into such capital stock). (b) Leverage Ratio. Borrower will not permit the Leverage Ratio as at the end of any fiscal quarter set forth below to be greater than the ratio set forth below opposite such fiscal quarter: -28- Maximum Fiscal Quarters Ending Leverage Ratio ------------------------------------------------------------- December 31, 1999 4.00 March 31, 2000 4.50 June 30, 2000 4.00 September 30, 2000 4.00 December 31, 2000 and thereafter 3.75 (c) For the purposes of the financial covenants contained in subsections (a) and (b) herein, the financial statements of Borrower's subsidiary, DirecTV Japan, Ltd. will be treated as consolidated with the financial statements of Borrower (whether or not required by GAAP) from the Effective Date through December 31, 2000, and thereafter (i) if such consolidation is required by GAAP or (ii) if Borrower or one or more of its Subsidiaries own securities of DirecTV Japan, Ltd. convertible into equity interests in DirecTV Japan, Ltd., which when combined with other equity interests owned by Borrower or one or more of its Subsidiaries, would result in Borrower and its Subsidiaries having more than a 50% interest in the profits or capital of DirecTV Japan, Ltd. SECTION 9 EVENTS OF DEFAULT 9.1 Events of Default. If one or more of the following described Events ----------------- of Default shall occur: (a) Borrower shall default in the due and punctual payment of (i) the principal of or the interest on any Loan within two Business Days of its due date, (ii) any fee due hereunder within 10 Business Days of its due date; or, (iii) any other amount due from it hereunder within 30 Business Days of its due date; or (b) Borrower or any of its Restricted Subsidiaries shall fail to perform or observe any of the terms, provisions, covenants, conditions, agreements or obligations contained herein (other than Section 7.3, and Sections 8.1 through 8.5,) and such failure shall continue for more than 20 days after written notice from Administrative Agent to Borrower of the existence and character of such failure to perform or observe; or (c) Borrower or any of its Restricted Subsidiaries shall fail to perform or observe any of the terms, provisions, covenants, conditions agreements or obligations contained in Section 7.3 and Sections 8.1 through 8.5; or (d) (i) Borrower, or any of its Restricted Subsidiaries shall become insolvent, or be unable, or admit in writing its inability, to pay its debts as they become due; or (ii) Borrower or any Restricted Subsidiary shall make an assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its properties or assets; or (iii) Borrower or any Restricted Subsidiary shall file or have filed against it a petition in bankruptcy or seeking -29- reorganization or to effect a plan or other arrangement with creditors or winding up or dissolution and such filing against it shall not be dismissed within 60 days after the date of such filing; or (iv) Borrower or any Restricted Subsidiary shall apply for or consent to the appointment of or consent that an order be made appointing any receiver or trustee for any of its or their properties, assets or business, or if a receiver or a trustee shall be appointed for all or a substantial part of its or their properties, assets or business; or (v) an order for relief shall be entered against Borrower or any Restricted Subsidiary under the United States federal bankruptcy laws as now or hereafter in effect; or (vi) Borrower or any Restricted Subsidiary shall take any action indicating its consent to, approval of or acquiescence in, any of the foregoing; or (e) Any representation or warranty made by Borrower herein or in any certificate or financial or other statement heretofore or hereafter furnished by Borrower or any of its officers to Administrative Agent or the Banks proves to be in any material respect false or misleading as of the date when made, deemed made or reaffirmed; or (f) Any final judgment, decrees, writs of execution, attachments or garnishments or any Liens, or any other legal processes shall be issued or levied against any of the assets or property of Borrower or any of its Restricted Subsidiaries (and shall not have been vacated, discharged or stayed) in amounts which in the aggregate would result in a Material Adverse Change (without limiting the generality of the foregoing, a judgment in excess of $75,000,000 in the aggregate shall, for purposes only of this Section 9.1(f), be deemed to result in a Material Adverse Change); provided, however, that such -------- ------- aggregate amount shall include only amounts in excess of (i) insurance coverage therefor and (ii) reserves on the books of Borrower or any of its Restricted Subsidiaries therefore; provided, further, that such aggregate amount shall not -------- ------- include any amounts with respect to matters subject to appeal conducted in good faith and diligently pursued or other further legal process by Borrower or any of its Restricted Subsidiaries or any amounts with respect to any such legal process which Borrower or any of its Restricted Subsidiaries has detached from such property by posting of a bond or equivalent process; or (g) All, or substantially all, of the assets and property of Borrower or any of its Restricted Subsidiaries shall be condemned, seized or otherwise appropriated; or (h) Any fact or circumstance (including without limitation a Reportable Event), which results in, or which Majority Banks determine in good faith could reasonably be expected to result in, the termination of any Plan of Borrower, any of its Subsidiaries or any ERISA Affiliate by the Pension Benefit Guaranty Corporation or the appointment by an appropriate United States District Court of a trustee to administer any such Plan, shall occur and shall continue for 30 days after written notice of such determination shall have been given to Borrower or any of its Subsidiaries by Administrative Agent, or a trustee shall be appointed by the appropriate United States District Court to administer any Plan of Borrower or any of its Subsidiaries, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any Plan of Borrower or any of its Subsidiaries or to appoint a trustee to administer any such Plan and, upon the occurrence of any of the foregoing, the aggregate amount of the unfunded vested liability for the benefits guaranteed by the Pension Benefit Guaranty Corporation under all such Plans and the present value of any Withdrawal Liability which remains unpaid is reasonably estimated to be in excess of $75,000,000 and such liability is not covered by insurance; or -30- (i) Borrower or any of its Restricted Subsidiaries (i) fails to make any payment (or otherwise satisfy) in respect of any indebtedness for money borrowed when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the document relating thereto on the date of such failure; or (ii) an event of default shall occur which permits the acceleration of indebtedness for money borrowed under any other agreement, contract, indenture, document or instrument executed, or which may be executed, by Borrower or any of its Restricted Subsidiaries, which failure or event of default has not been waived or cured; provided, however, that no Event of -------- ------- Default shall exist hereunder if the aggregate amount of the indebtedness which is not paid or may be accelerated with respect to the defaulted obligations shall not exceed in the aggregate $75,000,000; or (j) Any disposition of any Restricted Subsidiary shall have occurred, and: (i) prior to such disposition, either S&P or Moody's shall have publicly announced that Borrower's Debt Rating will be below Investment Grade after giving effect to such disposition; or (ii) as soon as reasonably practicable after its public announcement of such disposition, Borrower shall not have requested S&P and Moody's to publicly announce, prior to or no later than concurrently with the consummation of such disposition, that Borrower's Debt Rating will remain at least Investment Grade after giving effect to such disposition; or (iii) notwithstanding clause (ii), either S&P or Moody's shall not have publicly announced within 10 days after the consummation of such disposition that Borrower's Debt Ratings will remain at least Investment Grade after giving effect to such disposition; or (k) Any sale, spin-off, disposition or other transaction whereby General Motors Corporation will no longer beneficially own directly or indirectly at least 51 percent of the issued and outstanding capital stock of Borrower having voting power under ordinary circumstances to elect directors of Borrower (a "transaction") shall have occurred and: (i) prior to such transaction, either S&P or Moody's shall have publicly announced that its Debt Rating will be below Investment Grade after giving effect to such transaction; or (ii) as soon as reasonably practicable after its public announcement of such transaction, Borrower shall not have requested S&P and Moody's to publicly announce, prior to or no later than concurrently with the consummation of such transaction, that Borrower's Debt Rating will remain at least Investment Grade after giving effect to such transaction; or (iii) notwithstanding clause (ii), either S&P or Moody's shall not have publicly announced within 10 days after the consummation of such transaction that its Debt Ratings will remain at least Investment Grade after giving effect to such transaction; or -31- (l) This Agreement, at any time after its execution and delivery and for any reason other than the agreement of all Banks or satisfaction in full of all the duties and obligations hereunder, ceases to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect; or Borrower denies that it has any or further liability or obligation under this Agreement, or purports to revoke, terminate or rescind this Agreement. Then (a) automatically upon the occurrence of an Event of Default under Section 9.1(d), the Commitments shall immediately terminate, and all Loans and other liabilities and obligations outstanding under this Agreement shall, without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived, be forthwith due and payable, if not herein otherwise then due and payable, together with all costs and expenses (including break and funding costs and other costs in connection with the relending, reborrowing, funding or other employing of funds) incurred by the Banks as a result thereof, anything herein or in any agreement, contract, indenture, document or instrument contained to the contrary notwithstanding; and (b) at any time after the occurrence of an Event of Default other than under Section 9.1(d), and in each and every such case, unless such Event of Default shall have been remedied by Borrower to the satisfaction of Majority Banks or waived in writing by Majority Banks (except in the case of an Event of Default under Section 9.1(a), the waiver of which shall require the consent of all the Banks), Administrative Agent may, with the consent of the Majority Banks, or shall, upon the direction of Majority Banks, immediately terminate the Commitments, whereupon the same shall be cancelled and reduced to zero and any Loan Request given in respect of a Borrowing Date occurring on or after the date of such notice of cancellation shall cease to have effect and all Loans and all accrued interest thereon and all other liabilities and obligations outstanding under this Agreement shall, thereupon, without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived, be forthwith due and payable, if not otherwise then due and payable, together with all reasonable costs and expenses (including break and funding costs and other costs in connection with the relending, reborrowing, funding or other employing of funds) incurred by the Banks as a result thereof, anything herein or in any other agreement, contract, indenture, document or instrument contained to the contrary notwithstanding. Thereafter any Bank or the Banks may immediately, and without expiration of any period of grace, enforce payment of all liabilities and obligations of Borrower under this Agreement. 9.2 Recovery of Amounts Due. If any amount payable hereunder is not paid ----------------------- as and when due, Borrower hereby authorizes Administrative Agent, each Bank and their respective affiliates to proceed, to the fullest extent permitted by applicable law, without prior notice, by right of set-off, banker's lien or counterclaim, against any moneys or other assets of Borrower in any currency that may at any time be in the possession of Administrative Agent or any of its affiliates or such Bank or any of its affiliates, at any branch or office thereof, to the full extent of all amounts payable to Administrative Agent and the Banks hereunder. Any Bank that so proceeds or that has an affiliate that so proceeds shall forthwith give notice to Administrative Agent of any action taken by such Bank or affiliate pursuant to this Section 9.2. 9.3 Rights Cumulative. The rights of Administrative Agent and the Banks ----------------- provided for herein are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity. -32- SECTION 10 THE BANKS 10.1 Administration of Loan. The general administration of the Loans shall ---------------------- be by Administrative Agent and shall be governed by the provisions set forth in Exhibit B attached hereto and incorporated herein by reference. - --------- 10.2 Representations By Banks. Each Bank hereby represents that it will ------------------------ make each Loan hereunder in the ordinary course of its business and not with a view to engage in any distribution of any evidence of indebtedness to the public. SECTION 11 MISCELLANEOUS PROVISIONS 11.1 Amendments and Waivers. No amendment or waiver of any provision of ---------------------- this Agreement, and no consent with respect to any departure by Borrower therefrom, shall be effective unless the same shall be in writing and signed by Majority Banks (or by Administrative Agent at the written request of Majority Banks) and Borrower and acknowledged by Administrative Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, -------- ------- amendment, or consent shall, unless in writing and signed by all Banks and Borrower and acknowledged by Administrative Agent, do any of the following: (a) increase or extend the Commitment of any Bank (or reinstate any Commitment terminated pursuant to Section 9.1); (b) postpone or delay any date fixed by this Agreement for any payment of principal, interest, fees or other amounts due to Banks (or any of them) hereunder or revise Section 2.13(d); (c) reduce the principal of, or the rate of interest specified herein on any Loan, or any fees or other amounts payable hereunder; (d) change the percentage of Commitments or of the aggregate unpaid principal amount of the Loans which is required for Banks or any of them to take any action hereunder; or (e) amend this Section or any provision herein providing for consent or other action by all Banks; provided, further, that no amendment, waiver or consent shall, unless in writing - -------- ------- and signed by Administrative Agent in addition to Majority Banks or all Banks, as the case may be, affect the rights or duties of Administrative Agent under this Agreement or rights or privileges thereunder. 11.2 Notices. All notices, payments, requests, reports, information, ------- demands and other communications which any party hereto may desire, or may be required, to give or make to any other party hereto, shall (unless otherwise permitted as a telephonic notice or request hereunder) be given by mailing the same, postage prepaid, or by telex, or rapifax transmission, or by hand delivery or courier, to each party at its address set forth in Exhibit C attached hereto --------- and incorporated herein by reference, or to such other address as may, from time to time, be specified in writing by Borrower or any Bank. Such communications shall be deemed to have been duly given and received in the case of a telex, when the telex is sent and the appropriate answer-back is received, in the case of mail when sent by pre-paid certified or registered mail correctly addressed to the addressee, in the case of rapifax transmission, when transmission has been sent, and in the case of hand delivery or courier, when received. Administrative Agent may rely and act upon any Loan Request made by telex or other telexed, telephonic or facsimile instructions to Administrative Agent by any Person purporting to be an authorized Person of Borrower, and -33- Borrower shall be unconditionally and absolutely estopped from denying the authenticity and validity of any transaction or act made by Administrative Agent or any Bank in reliance thereon. Each party hereto shall promptly confirm by telex or rapifax any telephone communication made by it to another pursuant to this Agreement but the absence of such confirmation shall not affect the validity of such communication, which shall be effective upon receipt. If there is any conflict between any telephonic communication and a written confirmation, the written communication shall govern; provided, however, that the recipient of -------- ------- such communication shall be held harmless by all parties hereto with respect to any action taken in reliance on the telephonic communication prior to the time such recipient receives and has had reasonable time to review the subsequent written confirmation and initiate such corrective action as the recipient deems reasonable under the circumstances. 11.3 Waiver. Neither the failure of, nor any delay on the part of, any ------ party hereto in exercising any right, power or privilege hereunder, or under any agreement, contract, indenture, document or instrument mentioned herein, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder, or under any agreement, contract, indenture, document or instrument mentioned herein, preclude other or further exercise thereof or the exercise of any other right, power or privilege; nor shall any waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned herein, constitute a waiver of any other right, power, privilege or default or constitute a waiver of any other default of the same or of any other term or provision. All rights and remedies herein provided are cumulative and not exclusive of any rights or remedies otherwise provided by law. 11.4 California Law. The interpretation, enforcement and effect of this -------------- Agreement, the Loans and any agreements, contracts, indentures, documents or instruments delivered in accordance herewith, shall be governed and controlled in all respects by and construed according to the substantive laws of the State of California, to the jurisdiction of whose courts the parties hereto hereby agree to submit. 11.5 Headings. The headings set forth herein are solely for the purpose of -------- identification and shall not be construed as a part of the sections or subsections which they head. 11.6 Accounting Terms. All accounting terms not otherwise defined herein ---------------- have the meaning assigned to them in accordance with GAAP, provided, however, any act or condition in accordance herewith and permitted hereunder when taken, created or occurring, shall not become a violation of any section of this Agreement as a result of a subsequent change in GAAP. 11.7 Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the different parties hereto on separate counterparts, and all of said counterparts taken together shall constitute one and the same instrument. 11.8 Written Disclosure. Wherever written disclosure by Borrower to Banks ------------------ is required or permitted by this Agreement, written disclosure to Administrative Agent by Borrower shall constitute such disclosure. -34- 11.9 Singular; Plural. Whenever used herein, the singular number shall ---------------- include the plural, the plural the singular, and the use of any gender shall be applicable to all genders. 11.10 Illegality. The illegality or unenforceability of any provision of ---------- this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 11.11 Assignments. This Agreement shall bind and inure to the benefit of ----------- the parties hereto and their respective successors and assigns. No party hereto may assign or transfer all or any part of its rights and obligations hereunder, except that: (a) Any Bank may, with the prior written consent of Borrower at all times other than during the existence of an Event of Default, and Administrative Agent, which consents shall not be unreasonably withheld, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of Borrower or the Administrative Agent shall be required in connection with any assignment and delegation by Bank to an Approved Bank Affiliate of such Bank or another Bank) (each an "Assignee") by execution and delivery to, and acceptance by, the Administrative Agent of a Notice of Assignment and Acceptance, all, or any ratable part of all, of the Loans, the Commitments and the other rights and obligations of such Bank hereunder; provided, however, that any assignment to an -------- ------- Eligible Assignee which is not a Bank or an Approved Bank Affiliate shall be in an amount not less than the lesser of $10,000,000 or all, but not less than all, of the Loans, the Commitment and the other rights and obligations of such Bank hereunder. Upon execution of a Notice of Assignment and Acceptance by such Eligible Assignee in which it agrees to abide by all of the terms, conditions and obligations applicable to a Bank herein and to have a Commitment as specified in such agreement, such Eligible Assignee shall be deemed a Bank hereunder to the same extent as if it were a signatory hereto and, thereafter, such Eligible Assignee shall for all purposes be considered a "Bank" hereunder. Administrative Agent shall be entitled to a $2,500 processing fee, payable by the assignor, with respect to any such assignment by a Bank. (b) Subject to Section 11.16, Borrower authorizes each Bank and the Arrangers to disclose to any prospective assignee and assignee any and all information in such Bank's or the Arrangers' possession concerning Borrower, this Agreement and any collateral. 11.12 Obligations Several. The obligations of each Bank under this ------------------- Agreement are several. Neither Administrative Agent nor any Bank shall be liable for the failure of any other Bank to perform its obligations under this Agreement. 11.13 Participations. Any Bank may at any time sell, or grant -------------- participations in all or part of its Commitment or any Loan or Loans made to Borrower under this Agreement to any other Person, other than an individual, (a "Participant"); provided, however, no Bank may be relieved of its obligations under this Agreement except with the consent of Borrower and Administrative Agent. Any such sale or grant of a participation is subject to the following conditions: -35- (a) Administrative Agent and Borrower may, for all purposes of this Agreement, deem and treat a Bank party to this Agreement as the owner of such Bank's Loans hereunder for all purposes hereof until a written notice of the sale or participation shall have been received by Administrative Agent, together with Borrower's consent to treat such Participant as owner of such Loan. (b) Subject to Section 11.16, Borrower authorizes each Bank and the Administrative Agent to disclose to any prospective Participant and to any Participant any and all information in such Bank's or the Administrative Agent's possession concerning Borrower, this Agreement and any collateral. (c) Any agreement pursuant to which a Bank grants a participation in its rights with respect to any Loan or Loans shall provide that, with respect to any such Loan or Loans, such Bank shall retain the sole right and responsibility to exercise the rights of a Bank under this Agreement including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement and the right to take action to declare any amount due and payable pursuant to Section 9; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement without the consent of the Participant if such modification, amendment or waiver would (i) increase the amount of the Total Commitment or change the Commitment of such Bank, (ii) reduce interest, principal or fees owing to such Bank hereunder, (iii) extend the fixed date on which any sum is due hereunder, or (iv) release or subordinate any material portion of collateral. (d) Except as provided in this Section 11.13, no recipient of a participation in a Loan or Loans of any Bank shall have any rights under this Agreement other than to receive payment of principal of, and interest on the Loans and of such other amounts as Banks are entitled to receive pursuant to Sections 3.1, 3.2, 3.3, and 3.4 of this Agreement; provided, however such recipients shall be entitled to receive pursuant to Sections 3.1, 3.2 and 3.3 only the lesser of (i) the amount that the Bank from which the recipient received its participation would have received had such Bank not transferred an interest in its Loans to such recipient and (ii) the additional costs actually incurred by such recipient; and any demand by a Participant for payment hereunder shall certify that the amount demanded does not exceed the amount Participant is entitled to receive under this subsection (d). (e) Notwithstanding any other provision set forth in this Agreement, any Bank may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Loans owing to it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. 11.14 Fees and Expenses. Borrower agrees to pay on demand (a) to ----------------- Administrative Agent all reasonable costs, expenses and attorneys' fees (including allocated costs for in-house legal services) incurred by Administrative Agent and the Arrangers in connection with the preparation and administration of this Agreement and any documents including any amendments, waivers, or other modifications and (b) all reasonable costs, expenses and attorneys' fees (including allocated costs for in-house legal services) incurred by Administrative Agent and Banks in connection with the enforcement of this Agreement and any instrument or agreement required hereunder and in connection with any refinancing or restructuring of the Loans in the -36- nature of a "work-out"; provided, however that, in addition to costs of Administrative Agent's in-house counsel, Borrower shall be obligated to pay for the costs of no more than one counsel for Administrative Agent and all Banks (without prejudice to any Bank's right to engage additional counsel at its own cost and expense) unless any Bank shall in good faith reasonably determine that there is a conflict of interest that causes it to be reasonably necessary for such Bank to be represented by separate counsel. 11.15 Indemnity. Borrower agrees to indemnify the Administrative Agent, --------- the Arrangers, each Bank and their respective directors, officers, agents and employees (collectively, the "Indemnitees") from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses, including settlement costs) reasonably incurred by any of them arising out of or by reason of any investigation by governmental or judicial authorities or being made a party to any litigation or other similar proceeding related to any use made or proposed to be made by Borrower of the proceeds of any Loan for the acquisition of any other Person (other than with respect to a particular Indemnitee's losses, liabilities, claims, damages or expenses incurred as a result of such Indemnitee's gross negligence or willful misconduct), including, without limitation, the reasonable fees and disbursements of counsel (including allocated costs for in-house legal services) incurred in connection with any such investigation, litigation or other proceeding; provided, however, that -------- ------- Borrower shall have no obligation to indemnify or pay for the costs and expenses of more than one counsel for the Indemnitees, unless any Indemnitee shall in good faith reasonably determine that there is a conflict of interest that causes it to be reasonably necessary for any Indemnitees to be represented by other counsel. Counsel chosen to represent any Indemnitee pursuant to the previous sentence shall be reasonably satisfactory to Borrower. The obligations of Borrower under this Section shall survive the termination of this Agreement. 11.16 Confidentiality. In consideration of Borrower furnishing Confidential --------------- Information(as defined below) to Banks, the Arrangers and Administrative Agent (collectively, the "Recipients") and their respective directors, officers and employees (collectively, the "Representatives"), each Recipient agrees for itself that: (a) Such Recipient shall keep the Confidential Information confidential and shall not, without Borrower's prior written consent, disclose it in any manner whatsoever, in whole or in part, and shall not use the Confidential Information other than in connection with this Agreement. Each Recipient agrees to reveal the Confidential Information only to its Representatives, bank affiliates, auditors, counsel and other advisors, representatives or agents who need to know the Confidential Information for the purpose of this Agreement, who are informed by such Recipient of the confidential nature of the Confidential Information and who shall agree to act in accordance with the terms and conditions of this section. Each Recipient shall be responsible for any breach of this Section by its Representatives. (b) Without Borrower's prior written consent, no Recipient shall disclose to any Person the fact that the Confidential Information has been made available or any other facts with respect to this Agreement. (c) Upon payment in full of all obligations owing to a Recipient and termination of such Recipient's Commitments, if any, hereunder, copies of the Confidential Information shall be -37- returned by such Recipient to Borrower immediately upon its request, except for that portion of the information which consists of analyses, compilations, forecasts, studies or other documents prepared by such Recipient or its Representatives based on Confidential Information, which portion shall either be destroyed (as evidenced by a certificate of destruction signed by a duly authorized offer of such Recipient) or held by such Recipient and kept confidential and subject to the terms of this section; provided that such -------- Recipient shall not be required to return or destroy Confidential Information to the extent such Recipient reasonably determines that its retention of such Confidential Information is required by applicable law or regulation. Any oral Confidential Information shall continue to be subject to the terms of this Section. (d) Confidential Information shall not include such portions of the information furnished to a Recipient which (i) are or become generally available to the public other than as a result of a disclosure by such Recipient or its Representatives in violation of this Agreement, (ii) become available to such Recipient on a non-confidential basis from a source (other than Borrower or its Representatives) which is not known by such Recipient to be prohibited from disclosing such information to such Recipient, or (iii) were in such Recipient's possession prior to being furnished to such Recipient or its Representatives provided that the source of such information was not known by such Recipient to be prohibited from disclosing the information to such Recipient. (e) Subject to Section 6.15 and except as otherwise expressly set forth in this Agreement. each Recipient acknowledges that neither Borrower nor any of its Representatives makes any express or implied representation or warranty as to the accuracy or completeness of the information furnished to such Recipient, and that neither Borrower nor any of its Representatives shall have any liability resulting from the use of the information furnished to any Recipient, errors therein or omissions therefrom. (f) In the event any Recipient or any person to whom it transmits the Confidential Information pursuant to this Agreement becomes legally compelled to disclose any of the information, such Recipient shall, to the extent permitted by law, provide Borrower with prompt written notice thereof so that the Borrower may seek a protective order or other appropriate remedy and/or waiver such Recipient's compliance with the provisions of this section, In the event that such protective order or other remedy is not obtained, or that Borrower waives any Recipient's compliance with the provisions of this section, such Recipient may furnish only that portion of the Confidential Information which it is advised by written opinion of counsel that the disclosure thereof is legally required, and shall exercise its best efforts to obtain reliable assurance that confidential treatment will be accorded the Confidential Information so disclosed. (g) Notwithstanding the foregoing, a Recipient may (i) disclose any Confidential Information to bank examiners; (ii) use any Confidential Information in connection with the management, supervision and enforcement of this Agreement, including the enforcement of such Recipient's rights under any agreement executed in connection therewith; (iii) disclose any Confidential Information in connection with any litigation or dispute involving any such Person or the Borrower and related to this Agreement or to any use of proceeds of the Loans; (iv) disclose any Confidential Information to other Recipients; and (v) disclose Confidential Information to prospective assignees and Participants and assignees and Participants pursuant to Sections 3.8, 11.11(b) and 11.13(b); provided, further, that in each of the foregoing cases, such -38- Person shall use its best efforts to ensure that any such disclosure will be made under procedures reasonably calculated to maintain the confidentiality of such Confidential Information. For purposes of this Section, "Confidential Information" means information relating to the business, operation or technology of Borrower or its affiliates which Borrower has furnished to Banks, the Arrangers, Administrative Agent or their Representatives which is either non-public, confidential or proprietary in nature, together with copies and other reproductions thereof, and analyses, compilations, forecasts, studies or other documents prepared by any Banks or its Representatives which contain or otherwise reflect such information. This section shall survive termination of the Agreement. 11.17 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY -------------------------------- EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. [Remainder of page intentionally left blank] -39- IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto in Los Angeles, California as of the date first hereinabove written. HUGHES ELECTRONICS CORPORATION By:______________________________ Name: Title: S-1 BANK OF AMERICA, N.A., as Administrative Agent By:___________________________________ Name: Title: S-2 THE BANK OF NEW YORK By:___________________________________ Name: Title: S-3 BANK ONE, NA By:__________________________________ Name: Title: S-4 CITICORP USA, INC. By:_________________________________ Name: Title: S-5 DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLAND BRANCHES By: _______________________________ Name: Title: By: _______________________________ Name: Title: S-6 MERRILL LYNCH CAPITAL CORPORATION By: _______________________________ Name: Title: S-7 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: _______________________________ Name: Title: S-8 BANK OF AMERICA, N.A., as a Bank By: _______________________________ Name: Title: S-9 SCHEDULE 1 BANKS AND COMMITMENTS
Bank Commitment Normal Percentage ---- ---------- ----------------- Bank of America, N.A. $100,000,000 20.0000% Citicorp USA, Inc. $150,000,000 30.0000% Deutsche Bank AG, New York $ 50,000,000 10.0000% and/or Cayman Islands Branches Merrill Lynch $ 50,000,000 10.0000% Banc One $ 50,000,000 10.0000% J.P. Morgan $ 50,000,000 10.0000% Bank of New York $ 50,000,000 10.0000% Total $500,000,000 100.0000%
-1- EXHIBIT A LOAN REQUEST TO: Bank of America, N.A., as Administrative Agent for Banks FROM: Hughes Electronics Corporation DATE: RE: Hughes Electronics Corporation - Revolving Credit Agreement (Bridge Facility) Ladies and Gentlemen: 1. We refer to the Revolving Credit Agreement (Bridge Facility) dated as of November 24, 1999 and made among Hughes Electronics Corporation, the banks parties thereto ("Banks") and Bank of America, N.A., as administrative agent for the Banks (in such capacity "Administrative Agent"). Terms defined in the Agreement shall have the same meanings herein. 2. We hereby request that a [Base Rate Loan] [Eurodollar Loan] is made to us as follows: (i) Principal Amount: (ii) Borrowing Date: (iii) Interest Period (if a Eurodollar Loan): 3. For the purposes of inducing the Banks to make the Loan requested herein, we confirm that, pursuant to Section 5.3 of the Agreement, as of the date hereof: (i) the representations and warranties set out in Section 6 of the Agreement (with the exception of Section 6.6) are true and correct in all material respects; (ii) the most current financial statements delivered pursuant to Section 7.5 of the Agreement present fairly the financial position and results of operation and changes in financial position of Borrower and its consolidated Subsidiaries as at the end of, and for the fiscal period to which such statements relate as of the date thereof (subject, in the case of unaudited financial statements, to year end adjustments); and (iii) no Event of Default or Unmatured Event of Default has occurred and is continuing. A-1 LOAN REQUEST HUGHES ELECTRONICS CORPORATION By: ____________________________________ Name: Title: A-2 LOAN REQUEST EXHIBIT B RELATIONS AMONG THE BANKS AND AGENTS 1. Administration of the Credit. Payment of interest and principal on ---------------------------- the Loans and the facility fee and all other amounts payable by Borrower hereunder shall be made by Borrower in immediately available funds, directly to each Bank in the case of amounts payable under Sections 3.1, 3.2 and 3.3 and, in all other cases, to Administrative Agent, and Administrative Agent shall promptly distribute to the other Banks in immediately available funds their shares of principal, interest and fees and to each Bank as provided herein such other amounts as paid by Borrower. 2. Pro Rata Distribution. All facility fees will be divided among the --------------------- Banks in accordance with their Normal Percentage, and interest and principal payments on each Loan will be divided pro rata among Banks in accordance with their percentage interest in the Loan. 3. Right of Setoff. Any Bank which shall receive payment of or on --------------- account of all or part of its share of the Loans through the exercise of any right of setoff, counterclaim, or banker's lien, or otherwise in a greater proportion than the proportionate amount of principal and interest due it under this Agreement immediately prior to such payment shall purchase a ratable proportion of the portions of the Loan held by the other Banks so that all recoveries of principal and interest shall be shared by the Banks in accordance with their pro rata interests in the Loans outstanding hereunder. If all or any portion of such excess payment is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Any sum received by Bank through exercise of the right of setoff, counterclaim, or banker's lien shall be deemed to be first applied to such Bank's portion of the indebtedness under this Agreement, second as herein above provided and any balance remaining thereafter shall be deemed applied to any other indebtedness of Borrower to such Bank. 4. Notice of Event of Default. Upon receipt by Administrative Agent from -------------------------- Borrower of any communication calling for an action on the part of Banks, or upon notice to Administrative Agent of an Unmatured Event of Default or an Event of Default, it will in turn promptly inform the other Banks in writing of the nature of such communication or of the Unmatured Event of Default or Event of Default, as the case may be. 5. Actions by Administrative Agent. Upon any occasion requiring or ------------------------------- permitting an approval, consent, election or other action on the part of Banks, action shall be taken by Administrative Agent for and on behalf or for the benefit of all Banks upon the direction of the required number of Banks and the Administrative Agent, if applicable, as set forth in Section 11.1 of the Agreement. 6. Several Liability of Banks. The obligation of each Bank hereunder is -------------------------- several, and the failure of one Bank to perform hereunder shall in no way relieve the other Banks from performance. 7. Liability of Administrative Agent. Administrative Agent shall not be --------------------------------- liable or answerable for anything whatsoever in connection with this Agreement except for its willful B-1 RELATIONS AMONG THE BANKS AND THE AGENT misconduct or gross negligence, and Administrative Agent shall have no duties or obligations other than as provided herein. Administrative Agent shall be entitled to rely on any opinion of counsel (including counsel for Borrower) in relation to this Agreement, and upon statements and communications received from Borrower, or from any other person, believed by it to be authentic, and shall not be liable for any action taken or omitted in good faith on such reliance. 8. Indemnification of Administrative Agent. Each Bank agrees to --------------------------------------- indemnify Administrative Agent (to the extent not reimbursed by Borrower and without limiting the obligation of Borrower to do so), ratably according to its Normal Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by Administrative Agent under this Agreement except for Administrative Agent's gross negligence or willful misconduct. The obligations of the Banks under this Section 8 shall survive termination of the Agreement. 9. Rights of Administrative Agent as Bank. With respect to its -------------------------------------- obligation to lend under this Agreement and the Loans made by it, Bank of America shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not Administrative Agent; and the term "Banks" shall include Bank of America in its individual capacity. Bank of America may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with Borrower as if it were not Administrative Agent. 10. Assignment by Bank of its Obligations. Administrative Agent may deem -------------------------------------- and treat a Bank party to this Agreement as the owner of such Bank's portion of the Loans for all purposes hereof unless and until a written notice of the assignment or transfer of such Bank's obligations otherwise permitted under the Agreement executed by such Bank shall have been received by Administrative Agent, together with Borrower's consent to such assignment or transfer and such other documentation from such Bank and its assignee or transferee as Administrative Agent may reasonably request. 11. Representations by Banks. Neither Administrative Agent nor any Bank ------------------------ has made or makes to any other Bank any representation, and neither Administrative Agent nor any Bank assumes any responsibility, in respect to the execution, construction or enforcement of this Agreement or any other instrument or agreement executed by Borrower or by any other person or entity. 12. Independent Investigation by Banks. Each Bank has made and shall ---------------------------------- continue to make its own independent investigation of the financial condition and affairs of Borrower in connection with the making and the continuance of the Loans and has made and covenants that it shall continue to make its own appraisal of the creditworthiness of Borrower. Each Bank agrees Administrative Agent has no duty or responsibility, either initially or on a continuing basis, to provide any Bank with any credit or other information with respect to Borrower, whether coming into its possession before the making of the Loans or at any time or times thereafter except as expressly provided in this Agreement. B-2 RELATIONS AMONG THE BANKS AND THE AGENT 13. Successor Administrative Agent. Administrative Agent shall have the ------------------------------ right, at any time, to resign as Administrative Agent for the Banks hereunder. Such resignation shall not be effective until a successor Administrative Agent chosen by Majority Banks, and accepted by Borrower, shall accept appointment as Administrative Agent for the Banks hereunder. If no successor Administrative Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment, within 30 days after the retiring Administrative Agent has given notice of resignation, the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent reasonably acceptable to Borrower, which successor Administrative Agent shall be a commercial bank organized under the laws of the United States of America or a State thereof having a combined capital and surplus of at least $100,000,000. Upon the acceptance by the successor Administrative Agent of its appointment hereunder, the successor Administrative Agent shall succeed to and become vested with all the rights and obligations of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its obligations under this Agreement. The provisions of this Article shall inure to the benefit of the retiring Administrative Agent as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Exhibit B and Section 11.14 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. B-3 RELATIONS AMONG THE BANKS AND THE AGENT EXHIBIT C LENDING OFFICES OF BANKS AND ADDRESSES FOR NOTICES BORROWER 200 North Sepulveda Blvd. P. O. Box 956 ES, 001, A148 El Segundo, CA 90245-0956 Attention: Treasurer BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT Bank of America N.A. Mail Code: CA9-706-11-03 555 South Flower Street, 11th Floor Los Angeles, California 90071 Attention: Gina Meador Vice President Agency Management-Los Angeles Telephone: (213) 228-5245 Facsimile: (213) 228-2299 Administrative Agent's Payment Office: -------------------------------------- Bank of America N.A. Mail Code: CA4-706-05-09 1850 Gateway Boulevard, Fifth Floor Concord, California 94520 Attention: Glenis Croucher Assistant Vice President Agency Administrative Services West Telephone: (925) 675-8447 Facsimile: (925) 675-8500 C-1 BANK OF AMERICA, N.A., AS A BANK Domestic and Offshore Lending Office: ------------------------------------- Bank of America N.A. Mail Code: CA4-706-05-09 Agency Administrative Services-West 1850 Gateway Blvd., 5th Floor Concord, CA 94520 Attention: Glenis Croucher Sr. Account Administrator Telephone: (925) 675-8447 Facsimile: (925) 969-2807 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- Bank of America N.A. Mail Code: CA9-706-11-07 555 South Flower Street, 11th Floor Los Angeles, California 90071 Attention: Dianne J. Prust Vice President Credit Products Aerospace/Defense #9848 Telephone: (213) 228-2435 Facsimile: (213) 623-1959 THE BANK OF NEW YORK Domestic and Offshore Lending Office: ------------------------------------- The Bank of New York One Wall Street, 22/nd/ floor New York, NY 10005 Attention: Dawn Hertling Telephone: (212) 635-6742 C-2 Notices (other than Borrowing notices and Notices of Conversion/ ---------------------------------------------------------------- Continuation): -------------- The Bank of New York 10990 Wilshire Blvd. Suite 1125 Los Angeles, CA 90024 Attention: Jonathan Rollins Telephone: (310) 996-8658 Facsimile: (310) 996-8667 Email: jrollins@bankofny.com BANK ONE, NA Domestic and Offshore Lending Office: ------------------------------------- Bank One, NA 1 Bank One Plaza 10/th/ Floor Chicago, IL 60670 Attention: Sharon Bosch Telephone: (312) 732-7112 Facsimile: (312) 732-4240 Notices (other than Borrowing notices and Notices of Conversion/ ---------------------------------------------------------------- Continuation): -------------- Bank One, NA 777 South Figueroa 4/th/ Floor Los Angeles, CA 90017 Attention: Anthony Mathews Senior Vice President Telephone: (213) 683-4357 Facsimile: (213) 683-4999 Email: anthony_mathews@em.fcnbd.com C-3 CITICORP USA, INC. Domestic and Offshore Lending Office: ------------------------------------- Citicorp, USA, Inc. 399 Park Ave. New York, NY 10043 Attention: Alyssa Kawalek Loan Administrator Telephone: (302) 894-6055 Facsimile: (302) 894-6120 Notices (other than Borrowing notices and Notices of Conversion/ ---------------------------------------------------------------- Continuation): -------------- Citicorp USA, Inc. 787 West 5th Street 29th Floor Los Angeles, CA 90071 Attention: Walter Larsen Telephone: (213) 239-1501 Facsimile: (213) 623-3592 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES Domestic and Offshore Lending Office: ------------------------------------- Deutsche Bank AG 31 West 52/nd/ Street New York, NY 10019 Attention: Noble Samuel/Cheryl H. Mandelbaum Telephone: (212) 469-4091 Facsimile: (212) 469-4139 Notices (other than Borrowing notices and Notices of Conversion/ ---------------------------------------------------------------- Continuation): -------------- Deutsche Bank AG 31 West 52/nd/ Street New York, NY 10019 Attention: Joel Makowsky Vice President Telephone: (212) 469-7896 Facsimile: (212) 469-4604 C-4 MERRILL LYNCH Domestic and Offshore Lending Office: ------------------------------------- Merrill Lynch Capital Corp.--Loan Syndicates 250 Vesey Street World Financial Center 16/th/ Floor New York, NY 10281-1316 Attention: Mark Campbell Telephone: (212) 449-6996 (212) 449-7019 Facsimile: (212) 738-1719 Notices (other than Borrowing notices and Notices of Conversion/ ---------------------------------------------------------------- Continuation): -------------- Merrill Lynch Capital Corp.--Loan Syndicates 250 Vesey Street World Financial Center 16/th/ Floor New York, NY 10281-1316 Attention: Cesar Apostol Telephone: (212) 449-7441 Facsimile: (212) 449-2372 MORGAN GUARANTY TRUST COMPANY OF NEW YORK Domestic Lending Office ----------------------- Morgan Guaranty Trust Company of New York 60 Wall Street New York, NY 10260-0060 Execution Copies to: ------------------- Jeannie Mattson Associate Morgan Guaranty Trust Company of New York c/o J.P. Morgan Services, Inc. 500 Stanton Christiana Road 3/OPS2 Newark, DE 19713-2107 C-5 Conformed Copies to: ------------------- Robert Bottamedi Vice President Morgan Guaranty Trust Company of New York 60 Wall Street New York, NY 10260-0060 Offshore Lending Office ----------------------- Morgan Guaranty Trust Company of New York Euro-Loan Servicing Department c/o J.P. Morgan Services, Inc. 500 Stanton Christiana Road Newark, DE 19713-2107 Execution Copies to: ------------------- Jeannie Mattson Associate Morgan Guaranty Trust Company of New York c/o J.P. Morgan Services, Inc. 500 Stanton Christiana Road 3/OPS2 Newark, DE 19713-2107 Conformed Copies to: ------------------- Robert Bottamedi Vice President Morgan Guaranty Trust Company of New York 60 Wall Street New York, NY 10260-0060 Notices (other than Borrowing notices and Notices of ---------------------------------------------------- Conversion/Continuation): ------------------------- JP Morgan Securities Inc 60 Wall Street 5/th/ Floor New York, NY 10260-0060 Attention: Robert Bottamedi Vice President Telephone: (212) 648-1349 Facsimile: (212) 648-5018 C-6 EXHIBIT D EXISTING LIENS PanAmSat $124,000,000.00 Floating Rate Note secured by transponders of Galaxy III-R due 2002 Galaxy Latin America $95,000.00 Capital Lease of AT&T Telephone Switch ___________ Total $124,095,000.00 D-1 EXISTING LIENS EXHIBIT E OPINION OF COUNSEL November 24, 1999 To: The Banks listed on Schedule A hereto and Bank of America, N.A., as Administrative Agent Re: Hughes Electronics Corporation Revolving Credit Agreement (Bridge Facility) --------------------------------------------------------------------------- Ladies and Gentlemen: I am the Assistant General Counsel of Hughes Electronics Corporation, a Delaware corporation (the "Borrower"), in connection with the extension to Borrower of a revolving line of credit extended under and subject to the terms and provisions of the Revolving Credit Agreement (Bridge Facility) dated as of November 24, 1999 and made among Hughes Electronics Corporation, the banks parties thereto ("Banks") and Bank of America, N.A., as administrative agent for the Banks (in such capacity "Administrative Agent") (the "Credit Agreement"). Capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement. This opinion is rendered to you pursuant to Section 5.2(b) of the Credit Agreement. As Assistant General Counsel to Borrower, I have caused to be made such legal and factual examinations and inquiries, including an examination of originals or copies, certified or otherwise identified to my satisfaction as authentic, of such corporate records, agreements, instruments and other documents as I have deemed necessary or appropriate for the purposes of this opinion. I have caused to be obtained such certificates and other assurances (copies of which have been delivered to you) from public officials and officers and other employees of Borrower as I considered necessary or appropriate for the purpose of rendering this opinion. I have assumed the genuineness of all signatures (except that of Borrower), the authenticity of all documents submitted to me as originals, and the conformity with the originals of all documents submitted to me as copies. Subject to the limitations herein set forth, I am opining herein as to the effect on the subject transaction only of United States federal law, the laws of the State of California and the General Corporation Law of the State of Delaware. I am licensed to practice law in the State of California. I assume no responsibility as to the applicability to the subject transaction or the effect thereon of the laws of any other jurisdiction. E-1 OPINION OF COUNSEL Based upon the foregoing and in reliance thereon, and subject to the qualifications, limitations and assumptions set forth herein, I am of the opinion that, as of the date hereof: 1. Borrower is a corporation duly incorporated and validity existing as a corporation in good standing under the laws of the State of Delaware, with full corporate power and authority to own and lease its properties and conduct its business as presently owned and conducted. 2. Borrower is duly qualified to do business as a foreign corporation in good standing in the State of California. 3. Borrower has full corporate power and authority to borrow the sums provided for in the Credit Agreement, to execute and deliver the Credit Agreement and to perform its obligations thereunder. 4. All corporate action required to be taken by Borrower for the authorization, execution and delivery of the Credit Agreement by Borrower and the performance by Borrower of its obligations thereunder has been duly taken. 5. The officer of Borrower executing the Credit Agreement is duly and properly in office and duly authorized to execute the same. 6. The Credit Agreement is a valid and binding agreement of Borrower, subject to the limitations, qualifications, exceptions and assumptions set forth below. 7. To my knowledge, after causing to be conducted such legal and factual examination and inquiries and causing to be conducted such discussions with and obtaining such certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, no consent, permission, authorization, order or license of any United States federal or California governmental authority is necessary in connection with the execution and delivery of the Credit Agreement by Borrower and Borrower's performance of its obligations under the Credit Agreement. 8. There is no provision of the Certificate of Incorporation or the By- laws of Borrower which would be contravened by the execution and delivery of the Credit Agreement by Borrower or by the performance by Borrower of its obligations under the Credit Agreement. 9. Borrower is not an "investment company" as defined in the Investment Company Act of 1940, as amended. 10. To my knowledge, after causing to be conducted such legal and factual examination and inquiries and causing to be conducted such discussions with and obtaining such certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, no consent or approval of any trustee or holder of any material indebtedness of Borrower is necessary in connection with the execution and delivery of the Credit Agreement by Borrower and Borrower's performance of its obligations under the Credit Agreement. E-2 OPINION OF COUNSEL 11. There is no provision of any indenture or material agreement for borrowed money to which Borrower is a party or under which Borrower is obligated, and of which I am aware, after causing to be conducted such legal and factual examinations and inquiries and causing to be conducted such discussion with and obtaining such certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, which would be contravened by the execution and delivery of the Credit Agreement and the Notes by Borrower or by the performance by Borrower of its obligations under the Credit Agreement. 12. To my knowledge, after causing to be conducted such legal and factual examinations and inquiries and causing to be conducted such discussions with and obtaining such certificates or other confirmations from officers and other employees of Borrower as I considered appropriate in the circumstances, there is no judgment, decree or order of any court or governmental agency binding on Borrower which would be contravened by the execution and delivery of the Credit Agreement by Borrower and Borrower's performance of its obligations under the Credit Agreement and the Notes. 13. To my knowledge, after causing to be conducted such legal and factual examinations and inquiries and obtaining certificates or other confirmations from officers and employees of Borrower as I considered appropriate in the circumstances, except as set forth in Attachment 1 hereto, there is no claim, suit, action or proceeding pending or threatened against Borrower before any court or governmental agency which could reasonably be expected to result in a Material Adverse Change. The opinion expressed in paragraph 6 is subject to the following limitations, qualifications, exceptions and assumptions: (a) the enforcement of the Credit Agreement and the Notes may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws or by equitable principles relating to or limiting the rights of creditors generally; (b) the use of the term enforceable shall not imply any opinion as to the availability of equitable remedies; (c) I advise you that a California court may not strictly enforce certain covenants contained in the Credit Agreement or allow acceleration of the maturity of the indebtedness thereunder if it concludes that such enforcement or acceleration would be unreasonable under the then existing circumstances. I do believe, however, that subject to the limitations expressed elsewhere in this opinion, enforcement or acceleration would be available if an Event of Default occurs as a result of a material breach of a material covenant contained in the Credit Agreement; (d) The effect of California court decisions, invoking statutes or principles of equity, which have held that certain covenants and provisions of agreements are unenforceable where (i) the breach of such covenants or provisions imposes restrictions or burdens upon the debtor, including the acceleration of indebtedness due under debt instruments, and it cannot be demonstrated that the enforcement of such restrictions or burdens is reasonably necessary for the E-3 OPINION OF COUNSEL protection of the creditor, or (ii) the creditor's enforcement of such covenants or provisions under the circumstances would violate the creditor's implied covenant of good faith and fair dealing; (e) The unenforceability under certain circumstances, under California or federal law or court decisions, of provisions expressly or by implication waiving broadly or vaguely stated rights, unknown future rights, defenses to obligations or rights granted by law, where such waivers are against public policy or prohibited by law; (f) The unenforceability under certain circumstances of provisions to the effect that rights or remedies are not exclusive, that every right or remedy is cumulative and may be exercised in addition to or with any other right or remedy, that election of a particular remedy or remedies does not preclude recourse to one or more other remedies or that failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any such right or remedy; (g) The effect of Section 1717 of the California Civil Code, which provides that, where a contract permits one party to the contract to recover attorneys' fees, the prevailing party in any action to enforce any provision of the contract shall be entitled to recover its reasonable attorneys' fees; (h) The unenforceability under certain circumstances of provisions indemnifying a party against liability for its own wrongful or negligent acts or where such indemnification is contrary to public policy or prohibited by law; and (i) The enforceability under certain circumstances of provisions imposing penalties, forfeitures, late payment charges or an increase in interest rate upon delinquency in payment or the occurrence of a default. To the extent that the obligations of Borrower may be dependent upon such matters, I assume for purposes of this opinion that each of the Banks is duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization; that each of the Banks is duly qualified to engage in the transaction covered by this opinion; that the Credit Agreement has been duly authorized, executed and delivered by each of the Banks and that the Credit Agreement constitutes the valid and binding obligation of each of the Banks, enforceable in accordance with its terms; and that each of the Banks has the requisite corporate or organizational and legal power and authority to own its properties, to carry on its business as now being conducted and to perform its obligations under the Credit Agreement, including without limitation, to make the loans under the Credit Agreement. I am not expressing any opinion as to the effect of or the compliance by any Bank with any state or federal laws or regulations applicable to the transactions because of the nature of its respective business. This opinion is rendered to the Banks and Administrative Agent as of the date hereof in connection with the above transaction, and may not be relied upon by any person other than the Administrative Agent and the Banks and their permitted assignees, or by them in any other context, and may not be furnished to, quoted to or relied upon by any other person, firm or corporation for any purpose without my prior written consent; provided that each Bank and its -------- E-4 OPINION OF COUNSEL permitted assignees may provide this opinion (i) to bank examiners and other regulatory authorities should they so request or in connection with their normal examination, (ii) to the independent auditors and attorneys of such Bank, (iii) pursuant to order or legal process of any court or governmental agency, (iv) in connection with any legal action to which the Bank is a party arising out of the transactions contemplated by the Credit Agreement, or (v) in connection with the assignment of or sale of participations in the Loans. Very truly yours, E-5 OPINION OF COUNSEL SCHEDULE A TO OPINION OF COUNSEL E-6 OPINION OF COUNSEL ATTACHMENT A TO OPINION OF COUNSEL LITIGATION [None.] E-7 OPINION OF COUNSEL EXHIBIT F [FORM OF COMPLIANCE CERTIFICATE] COMPLIANCE CERTIFICATE THE UNDERSIGNED HEREBY CERTIFIES THAT: (1) I am the duly elected [Title] of Hughes Electronics Corporation, a Delaware corporation ("Borrower"); (2) I have reviewed the terms of that certain Revolving Credit Agreement (Bridge Facility) dated as of November 24, 1999, as amended, supplemented or otherwise modified to the date hereof (said Revolving Credit Agreement, as so amended, supplemented or otherwise modified, being the "Credit Agreement", the terms defined therein and not otherwise defined in this Certificate (including Attachment No. 1 annexed hereto and made a part hereof) being used in this Certificate as therein defined), by and among Borrower, the financial institutions listed therein as Banks, and Bank of America, N.A., as Administrative Agent, and I have made, or have caused to be made under my supervision, a review in reasonable detail of the transactions and condition of Borrower and its Subsidiaries during the accounting period covered by the attached financial statements; and (3) The examination described in paragraph (2) above did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes an Event of Default or Unmatured Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate[, except as set forth below]. [Set forth [below] [in a separate attachment to this Certificate] are all exceptions to paragraph (3) above listing, in detail, the nature of the condition or event, the period during which it has existed and the action which Borrower or any of its Subsidiaries, as applicable, has taken, is taking, or proposes to take with respect to each such condition or event: _______________________________________________________________________________] F-1 COMPLIANCE CERTIFICATE The foregoing certifications, together with the computations set forth in Attachment No. 1 annexed hereto and made a part hereof and the financial statements delivered with this Certificate in support hereof, are made and delivered this __________ day of _____________, ____ pursuant to subsection 7.5(d) of the Credit Agreement. DATED: ____________________ HUGHES ELECTRONICS CORPORATION By:__________________________ Name: Title: F-2 COMPLIANCE CERTIFICATE ATTACHMENT NO. 1 TO COMPLIANCE CERTIFICATE This Attachment No. 1 is attached to and made a part of a Compliance Certificate dated as of ____________, ____ and pertains to the period from ____________, ____ to ____________, ____. Subsection references herein relate to subsections of the Credit Agreement. A. Maximum Leverage Ratio (for the four-fiscal quarter period ending _____________, ____) 1. Outstanding principal amount of all obligations and liabilities for borrowed money: $_____________ 2. portion of obligations with respect to capital leases that are capitalized in excess of $25,000,000: $_____________ 3. Consolidated Funded Indebtedness (1+2): $_____________ 4. Consolidated Net Income: $_____________ 5. Consolidated Interest Charges: $_____________ 6. Provisions for taxes, if any, based on income used or included in determining of 5: $_____________ 7. Total depreciation expense deducted in determining 5: $_____________ 8. Total amortization expense deducted in determining 5: $_____________ 9. Adjustments per clauses (e), (f) and (g) of definition of Consolidated EBITDA: (a) Asia Pacific Mobile Telecommunications $_____________ (b) Hughes Space and Communication ______________ (c) ICO Global Communications ______________ (d) Hughes Network Systems wireless business ______________ (e) PanAmSat launch delays ______________ (f) DirecTV Japan, Ltd. ______________ Total $ ============= 10. Less DirecTV Japan, Ltd. cash losses per clause (h) of definition of consolidated $_____________ EBITDA: F-3 COMPLIANCE CERTIFICATE 11. Non-cash charges resulting from a change in business strategy regarding DirecTV Japan, Ltd. (only for fiscal quarters in fiscal year ending December 31, 2000) $_____________ 12. Consolidated EBITDA (4+5+6+7+8+9-10+11): $_____________ 13. Leverage Ratio (3):(12): ____:1.00 14. Maximum ratio allowed under subsection 8.5(b): ____:1.00 B. Minimum Shareholders' Equity 1. Base Shareholders' Equity: $7,125,000,000 2. 50% of consolidated net income (as determined according to GAAP) earned in each fiscal quarter ending after December 31, 1998 (with no deduction for a net loss in any such fiscal quarter): $_____________ 3. 50% aggregate increase in Equity by reason of Borrower's issuance of capital stock: $_____________ 4. Minimum Shareholders' Equity (1+2+3): $_____________ 5. Shareholders' Equity $_____________ F-4 COMPLIANCE CERTIFICATE EXHIBIT G [FORM OF NOTICE OF ASSIGNMENT AND ACCEPTANCE] [Date] To: Bank of America, N.A., as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Revolving Credit Agreement (Bridge Facility) dated as of November 24, 1999 between Hughes Electronics Corporation, a Delaware corporation ("Borrower"), Lenders from time to time party thereto, and Bank of -------- America, N.A., as Administrative Agent (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined). --------- 1. We hereby give you notice of, and request your consent to, the assignment by [____________________ ] (the "Assignor") to [___________________] (the -------- "Assignee") of _________% of the right, title and interest of the Assignor in -------- and to the Agreement, including the right, title and interest of the Assignor in and to the Commitment of the Assignor and all outstanding Loans made by the Assignor. Before giving effect to such assignment: (a) the aggregate amount of the Assignor's Commitment is $__________; and (b) the aggregate principal amount of its outstanding Loans is $_________. 2. The Assignee hereby represents and warrants that it has complied with the requirements of Section 11.11 of the Agreement in connection with this ------------- assignment and acknowledges and agrees that: (a) other than the representation and warranty that it is the legal and beneficial owner of the Normal Percentage being assigned thereby free and clear of any adverse claim, the Assignor has made no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Agreement or the execution, legality, validity, enforceability, genuineness or sufficiency of the Agreement; (b) the Assignor has made no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance by Borrower of its obligations under the Agreement; (c) it has received a copy of the Agreement, together with copies of the most recent financial statements delivered pursuant to Section 7.5 thereof ----------- and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (d) it will, independently and without reliance upon Administrative Agent or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement; (e) it appoints and authorizes Administrative Agent to take such action and to exercise such powers under the Agreement as are delegated to Administrative Agent by the Agreement; and (f) it will perform in accordance with their terms all of the obligations which by the terms of the Agreement are required to be performed by it as a Bank. G-1 ASSIGNMENT AND ACCEPTANCE AGREEMENT 3. The Assignee agrees that, upon receiving your consent to such assignment and from and after [________, ____], the Assignee will be bound by the terms of the Agreement, with respect to the interest in the Agreement assigned to it as specified above, as fully and to the same extent as if the Assignee were a Bank originally holding such interest in the Agreement. G-2 ASSIGNMENT AND ACCEPTANCE AGREEMENT 4. The following administrative details apply to the Assignee: (a) Offshore Lending Office: Assignee name: ______________________________ Address: ____________________________________ _____________________________________________ Attention: __________________________________ Telephone: (___) ___________________________ Telecopier: (___) ___________________________ (b) Domestic Lending Office: Assignee name: ______________________________ Address: ____________________________________ _____________________________________________ Attention: __________________________________ Telephone: (___) ___________________________ Telecopier: (___) ___________________________ (c) Notice Address: Assignee name: ______________________________ Address: ____________________________________ _____________________________________________ Attention: __________________________________ Telephone: (___) ___________________________ Telecopier: (___) ___________________________ (d) Payment Instructions: Account No.: Account No. _________________________________ Attention: __________________________________ Reference: __________________________________ G-3 ASSIGNMENT AND ACCEPTANCE AGREEMENT IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice of Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned. Very truly yours, [ASSIGNOR] By: _____________________________ Name: Title: [ASSIGNEE] By: _____________________________ Name: Title: We hereby consent to the foregoing assignment. HUGHES ELECTRONICS CORPORATION By: _________________________ Name: Title: BANK OF AMERICA, N.A., as Administrative Agent By: _________________________ Name: Title: G-4 ASSIGNMENT AND ACCEPTANCE AGREEMENT EX-10.12 12 1ST AMEND REVOLV AGREE BRIDGE FACILITY DEC 31, 1999 EXHIBIT 10.12 HUGHES ELECTRONICS CORPORATION FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (BRIDGE FACILITY) This FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (BRIDGE FACILITY) (this "Amendment") is dated as of December 31, 1999 and entered into by and among HUGHES ELECTRONICS CORPORATION, a Delaware corporation (the "Borrower"), the financial institutions listed on the signature pages hereof (the "Banks"), and BANK OF AMERICA, N.A., as the administrative agent for the Banks (in such capacity the "Administrative Agent") and is made with reference to that certain Revolving Credit Agreement (Bridge Facility) dated as of November 24, 1999 (as so amended, the "Credit Agreement"), by and among the Borrower, the lending institutions identified therein and the Administrative Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Borrower and Banks desire to amend the Credit Agreement to (i) revise the definition of Consolidated EBITDA; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 Amendments to Section 1: Definitions ------------------------------------- Subsection 1.1 of the Credit Agreement is hereby amended by deleting the definition of Consolidated EBITDA in its entirety, and by replacing it with the following: "Consolidated EBITDA" means, for any period, for Borrower and its Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Consolidated Net Income, (b) Consolidated Interest Charges, (c) the amount of taxes, based on or measured by income, used or included in the determination of such Consolidated Net Income, (d) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income, (e) for each fiscal quarter in the fiscal year ending December 31, 1999, (i) the amount of charges taken in connection with the cancellation of contract with Asia Pacific Mobile Telecommunications, up to an aggregate amount of $92,000,000 for all such fiscal quarters, and (ii) the amount of charges taken in connection with development costs and schedule delays at Hughes Space and Communication up to an aggregate amount of $125,000,000 for all such fiscal quarters, (f) for the last fiscal quarter of the fiscal year ending December 31, 1999, (i) if a non-cash charge is taken in connection with the write-off of equity investment in ICO Global Communications, the amount of such non-cash charge up to an aggregate amount of $62,000,000, (ii) if a non-cash charge is taken in connection with the write-off of equity investment in the Hughes Network Systems wireless business, the amount of such non-cash charge up to an aggregate amount of $272,000,000, and (iii) if a change in business strategy related to DirecTV Japan, Ltd. results in cash and/or non-cash charges, the amount of such cash and/or non-cash charges up to an aggregate amount of $250,000,000, and (g) for each fiscal quarter in the fiscal year ending December 31, 2000, the amount of non-cash charges taken in connection with ICO Global Communications and PanAmSat launch delays, up to an aggregate amount for all such fiscal quarters of (x) $150,000,000 minus (y) the amount of the charge, if any, added pursuant to clauses (f)(i) above; minus (h) ----- for each fiscal quarter in the fiscal year ending December 31, 2000, the amount of cash losses (whether or not accounted for as charges under GAAP) in connection with DirecTV Japan, Ltd., but only if such cash losses were reflected in the charges, if any, added pursuant to clause (f)(iii); plus (i) for each ---- fiscal quarter in the fiscal year ending December 31, 2000, if any change in business strategy regarding DirecTV Japan, Ltd. results in a non-cash charge, the amount of such non-cash charge up to an aggregate amount of $150,000,000 minus the amount of non-cash charges, if any, added pursuant to clause (f)(iii) above. 2. CONDITIONS TO EFFECTIVENESS Section 1 of this Amendment shall become effective only upon the satisfaction of all of the following conditions precedent (the date of satisfaction of such conditions being referred to herein as the "Amendment Effective Date"): (A) On or before the Amendment Effective Date, Borrower shall deliver to the Banks (or to the Administrative Agent for the Banks with sufficient originally executed copies, where appropriate, for each Bank and its counsel) the following, each, unless otherwise noted, dated the Amendment Effective Date: (1) A certificate, signed by a vice president or assistant treasurer of Borrower dated the Amendment Effective Date certifying: (i) that the representations and warranties of Borrower contained in the Credit Agreement are true and correct in all material respects; and (ii) that, after giving effect to this Amendment, no event has occurred and is continuing or would result from the making of a Loan which constitutes or would constitute an Event of Default or an Unmatured Event of Default; and (2) Copies of this Amendment executed by Borrower, the Majority Banks and the Administrative Agent. (B) All fees and other amounts due to the Administrative Agent, Syndication Agent, Documentation Agent, Arranger and any Bank through the Amendment Effective Date from Borrower shall have been received by such person. 3. BORROWER'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Borrower represents and warrants to each Bank that the following statements are true, correct and complete: (A) Corporate Power and Authority. Borrower has all requisite ----------------------------- corporate power and authority to enter into this Amendment and to carry out the transactions 2 contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "Amended Agreement"). (B) Authorization of Agreements. The execution and delivery of this --------------------------- Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Borrower. (C) No Contravention. There is no charter, by-law, or capital stock ---------------- provision of Borrower and no provision of any indenture or material agreement, written or oral, to which Borrower is a party or under which Borrower is obligated, nor is there any statute, rule or regulation, or any judgment, decree or order of any court or agency binding on Borrower which would be contravened by the execution, delivery and performance of any provision, condition, covenant or other term of this Amendment or the Amended Agreement. (D) Binding Obligation. This Amendment and the Amended Agreement ------------------ are the legal, valid and binding obligation of Borrower, enforceable against it in accordance with their terms, and any instrument or agreement required hereunder or by the Amended Agreement, when executed and delivered, will be similarly valid, binding and enforceable. (E) Incorporation of Representations and Warranties From Credit ----------------------------------------------------------- Agreement. The representations and warranties contained in Section 6 of the - ---------- Credit Agreement are and will be true, correct and complete in all material respects on and as of the Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. (F) Absence of Default. After giving effect to this Amendment, no ------------------ event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Unmatured Event of Default. 4. MISCELLANEOUS (A) Reference to and Effect on the Credit Agreement and the Other Loan Documents. (i) On and after the Amendment Effective Date, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other documents entered pursuant to the Credit Agreement to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other documents entered pursuant to the Credit Agreement shall remain in full force and effect and are hereby ratified and confirmed. 3 (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. (B) Fees and Expenses. Borrower acknowledges that all costs, fees ----------------- and expenses as described in subsection 11.14 of the Credit Agreement incurred by the Arranger, the Administrative Agent and their counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of Borrower. (C) Headings. Section and subsection headings in this Amendment are -------- included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. (D) California Law. The interpretation, enforcement and effect of -------------- this Amendment shall be governed and controlled in all respects by and construed according to the substantive laws of the State of California. (E) Counterparts; Effectiveness. This Amendment may be executed --------------------------- in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment (other than the provisions of Section 1 hereof, the effectiveness of which is governed by Section 2 hereof) shall become effective upon the execution of a counterpart hereof by Borrower and Majority Banks and receipt by Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. HUGHES ELECTRONICS CORPORATION By:____________________________________ Name: Title: S-1 BANK OF AMERICA, N.A., as Administrative Agent By:____________________________________ Name: Title: S-2 THE BANK OF NEW YORK By:____________________________________ Name: Title: S-3 BANK ONE, NA By:_____________________________________ Name: Title: S-4 CITICORP USA, INC. By:_____________________________________ Name: Title: S-5 DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLAND BRANCHES By:____________________________________ Name: Title: By:____________________________________ Name: Title: S-6 MERRILL LYNCH CAPITAL CORPORATION By:_____________________________________ Name: Title: S-7 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By:____________________________________ Name: Title: S-8 BANK OF AMERICA, N.A., as a Bank By:____________________________________ Name: Title: S-9 EX-27 13 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HUGHES ELECTRONICS CORPORATION DECEMBER 31, 1997, 1998 and 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO 1999 FORM 10-K. 0000944868 HUGHES ELECTRONICS CORPORATION 1,000,000 U. S. DOLLARS 12-MOS 12-MOS 12-MOS DEC-31-1997 DEC-31-1998 DEC-31-1999 JAN-01-1997 JAN-01-1998 JAN-01-1999 DEC-31-1997 DEC-31-1998 DEC-31-1999 1 1 1 0 0 111 2,784 1,342 127 535 788 1,054 15 24 93 498 466 392 5,179 4,075 3,858 4,157 4,869 6,516 (953) (988) (1,385) 12,142 12,617 18,597 1,007 1,346 2,642 638 779 1,586 0 0 1,488 0 0 0 0 0 0 8,340 8,412 10,193 12,142 12,617 18,597 854 840 1,010 2,838 3,481 5,560 538 607 955 1,451 1,818 3,030 1,344 1,709 2,959 19 39 123 91 18 123 374 (103) (660) 162 (142) (237) 237 64 (391) 233 196 100 (21) 0 0 0 (9) 0 450 251 (291) 0 0 0 0 0 0
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