EX-2 4 supplement.txt EX2.1(C) EXHIBIT 2.1(c) EXHIBIT G TO MERGER AGREEMENT SUMMARY OF TERMS AND CONDITIONS FOR DISCREPANCY NOTES AND DISCREPANCY NOTE AGREEMENT Issuer: Acquiror Holders: Preferred Stockholders of the Company and their affiliates. Subsidiary Guarantors: Same, if any, in the existing Term Credit, Revolving Credit and Bridge Facilities to the extent not prohibited by the Indenture. Initial Principal Amount: As determined by Section 2.01(b) of the Merger Agreement; provided, that if the Initial Principal Amount of the Discrepancy Notes is less than $10,000,000, the covenants relating to asset sales, investments, incurrence of debt and incurrence of liens shall conform to the covenants set forth in the HY Indenture, but all other terms, provisions and requirements shall remain the same. Maturity Date: 3 years from the date of initial issuance. Interest: 12% per annum, payable quarterly in arrears by capitalizing accrued interest into principal. Default rate is 14%. Optional Prepayments: At any time in any amount, subject to Restrictions on Cash Payments (set forth below). Mandatory Prepayments: In the event that the Issuer or any of its subsidiaries shall be required to mandatorily, or voluntarily elects to, prepay, repay or redeem (or offer to prepay, repay or redeem) any Unsecured Indebtedness or Subordinated Indebtedness, then the Issuer shall be required to make a ratable prepayment of the Notes determined with respect to the amount of such other prepayment, repayment or redemption; provided, this provision shall not apply with respect to scheduled payments of interest. Certain Indebtedness: As used in this Summary of Terms, the following terms shall generally mean the following: "Indebtedness" shall be defined in a manner substantially similar to the corresponding definitions in the existing Term Credit, Revolving Credit and Bridge Facilities, provided, that any capital stock, which is redeemable by the holder thereof or upon the occurrence of any event or condition, shall be included as Indebtedness. "Subordinated Indebtedness" means all Indebtedness of Acquiror or any Acquiror Subsidiary (after giving effect to the Merger) which (i) together with all Contingent Obligations related thereto, is not secured by a lien on any property or assets of Acquiror or any Acquiror Subsidiary, (ii) does not prohibit any lien granted in favor or for the benefit of the Shareholder Guarantors or the Holders or limit the ability of Acquiror to grant any lien on its property or assets, (iii) is not supported by a Contingent Obligation of a Person which is not Acquiror or any other Acquiror Subsidiary unless any reimbursement obligation of Acquiror or Acquiror Subsidiary in respect thereof also constitute Subordinated Indebtedness as provided herein, (iv) does not mature or require any scheduled payments of principal or interest (other than interest payable-in-kind) prior to the date which is 366 days after the Maturity Date, (v) do not contain terms and provisions more restrictive to Acquiror and Acquiror Subsidiaries than those set forth in the Indenture, and (vi) is subordinated in all respects pursuant to subordination provisions satisfactory to the Holders (which shall include, without limitation, payment and remedy blockage rights). "Unsecured Indebtedness" means all Indebtedness of any Acquiror Subsidiary (after giving effect to the Merger) which (i) is not secured by a lien on any property or assets of any Acquiror Subsidiary, (ii) does not prohibit any lien granted in favor or for the benefit of the Shareholder Guarantors or the Holders or limit the ability of Acquiror to grant any lien on its property or assets to the Shareholder Guarantors or the Holders, (iii) if such Indebtedness of any Acquiror Subsidiary is supported by a Contingent Obligation of a Person which is not Acquiror or Acquiror Subsidiary and Acquiror has agreed to reimburse such Person for any payments made by it in respect of any Acquiror Subsidiary Indebtedness, such reimbursement obligations by Acquiror is not secured by a lien on any of the property or assets of Acquiror, (iv) does not mature or require any scheduled payments of principal prior to the date which is 366 days after the Maturity Date, (v) the provisions relating the amount, accrual and payment of interest shall be reasonably acceptable to the Holders, and (vi) do not contain terms and provisions more restrictive to Acquiror and Acquiror Subsidiaries than those set forth in the Discrepancy Note Documents; provided, that (a) in certain circumstances to be negotiated between the Holders and Hughes, Unsecured Indebtedness shall be limited to the Tranche A Loans outstanding under the Revolving Credit Facility as in effect on the Closing Date (after giving effect to any payments or commitment reductions required by the Bank Waiver, but without giving any effect to increase in commitment thereof or any extension of the maturity date thereof granted by the Tranche A lenders) which are guaranteed by Hughes, and (b) so long as no Indebtedness of Acquiror or the Indebtedness under the Revolving Credit Facility shall have been accelerated, all trade payables incurred in the ordinary course of business. Restriction on Cash Payments: So long as the Tranche A Loans under the Revolving Credit Facility as in effect on the Closing Date remain outstanding (without giving any effect to increase in commitment thereof or any extension of the maturity date thereof granted by the Tranche A lenders, but including all amounts remaining outstanding after the maturity date) and are guaranteed by Hughes, Issuer shall not make any cash payments in respect of the principal amount of the Discrepancy Notes nor any of the other types of indebtedness described in Mandatory Prepayments above. Adjustment of Principal Within ten (10) Business Days after Value of Notes: September 30, 2001, the Agent (as defined Notes: below) shall calculate the amount (such amount, the "Revised XM Value") equal to the product of (x) the XM Share Price (as defined in the Merger Agreement) as of September 30, 2001 and (y) the number of XM Merger Shares delivered at the Merger Closing Date. If the Revised XM Value exceeds the value of such XM Merger Shares at the Merger Closing Date as determined pursuant to the Merger Agreement at the Effective Time (the "Initial XM Value"), then the aggregate outstanding principal amount of all of the Notes shall be reduced, on a pro rata basis according to the aggregate outstanding principal amount of each Note, by an amount equal to (a) the Revised XM Value minus (b) the Initial XM Value; provided that in no case shall the outstanding principal amount of any Note be reduced to a number less than zero. If the Revised XM Value does not exceed the Initial XM Value, then there shall be no adjustment to the outstanding principal amount of any Note. If no Discrepancy Notes were issued on the Merger Closing Date, there shall be no adjustment to the Preferred Stockholder Merger Consideration. If the Discrepancy Notes are adjusted so that the aggregate principal amount thereof is reduced to zero, the Discrepancy Notes shall be cancelled and upon payment of all other amounts payable or owing under the Discrepancy Note Documents, all such Discrepancy Note Documents shall be terminated. Security and Pledge: Substantially the same as set forth in the Reimbursement Security and Pledge Agreement. Intercreditor terms between the Shareholder Guarantors and the Holders shall be subject to the Intercreditor Agreement and the Collateral Purchase Agreement. Conditions: Such conditions, certificates, financing statements, opinions and other documentation as may be reasonably requested by the Holders relating to the Note Documents and creation and perfection of security interests. Representations and Representations and warranties shall Warranties of the Issuer include the following (subject to and its Subsidiaries: qualifications reasonably acceptable to the Issuer and the Holders): - Corporate Existence and Power - Corporate Authorization; No Contravention - Government Approvals - Binding Effect - Litigation - No Default - ERISA Compliance - Title to Property - Taxes - Environmental Matters - Regulated Entities - Subsidiaries - Insurance - Collateral; Property - Pledge and Security - Disclosure - Satisfaction of Conditions - Solvency of Acquiror and Consolidated Acquiror Subsidiaries, including the Company and its Subsidiaries, after giving effect to the transactions contemplated by the Merger Agreement, such representation and warranty to apply to the consolidated group of Acquiror, taken as a whole, and assuming that (but not relying upon) the conditions set forth in Section 7.02(c) of the Merger Agreement are true. The representations and warranties, to the extent applying to Acquiror Subsidiaries, shall be made with the express exclusion of the Company and its Subsidiaries, except that the solvency representation and warranty shall be made with the express inclusion of the Company and its Subsidiaries. Covenants of the Issuer Covenants shall include the following and its Subsidiaries: (subject to qualifications reasonably acceptable to the Issuer and the Holders): - Conduct of Business; Preservation of Corporate Existence - Maintenance of Property - Compliance with Laws - Security and Pledge - Government Approvals - Limitation on Liens - Disposition of Assets, Consolidations and Mergers, but the following shall in any event be permitted: - Dispositions required or permitted by the Shareholder Guarantors - Ordinary course of business dispositions - Dispositions by Acquiror Subsidiaries of assets so long as the proceeds thereof are reinvested within 180 days in Permitted Reinvestments (to be defined) and otherwise permitted (but in no event more permissive than the Indenture) - Dispositions by Acquiror of assets (other than XM) so long as such disposition is for fair value, the consideration thereof is at least 75% cash, the proceeds thereof are reinvested within 180 days in Permitted Reinvestments (to be defined) and such proceeds are deposited in a cash collateral account pending such reinvestment - Dispositions of a limited amount of assets the proceeds of which may be used to fund ordinary course operating costs and expenses (but in no event more permissive than the Indenture) - Intercompany transactions among Acquiror Subsidiaries - Acquiror Subsidiaries may dividend, transfer or otherwise dispose of assets to Acquiror without consideration - The foregoing to be permitted so long as it would not result in any default under any other contractual obligation - Investments, but the following shall in any even be permitted: - Permitted Reinvestments - Investments in Acquiror Subsidiaries made with proceeds of Dispositions of a limited amount of assets to fund ordinary course operating costs and expenses (but in no event more permissive than the Indenture) - Investments made with Qualified Proceeds (the proceeds of Qualified Subordinated Debt and Acquiror equity proceeds) - Intercompany transactions among Acquiror Subsidiaries - The foregoing to be permitted so long as it would not result in any default under any other contractual obligation - Transactions with Affiliates - Restricted Payments - Limitation on Indebtedness, but the following shall in any event be permitted: - Scheduled Indebtedness outstanding at the Closing Date (to the extent contained in the Acquiror or Company (see below for qualifications) Disclosure Schedules to the Merger Agreement or otherwise permitted to be incurred pursuant to the Merger Agreement - Unlimited Qualified Subordinated Indebtedness (to be defined (but in any event will not permit payments or become due earlier than 366 days after the Maturity Date)) of Acquiror and Acquiror Subsidiaries - Unlimited Unsecured Indebtedness (to be defined (but in any event will not permit payments or become due earlier than 366 days after the Maturity Date)) of Acquiror Subsidiaries only - Vendor financings (including, without limitation, the Motorola financing) currently permitted by the Bridge Facility - Qualified Unsecured Contingent Obligations (to be defined) of Acquiror in respect of permitted vendor financings of Acquiror Subsidiaries - The foregoing to be permitted so long as it would not result in any default under any other contractual obligation - Financial Information; Certificates; Other Information - Notices - Maintenance of Insurance - Inspection of Property and Books and Records - Environmental Laws - No Subsidiaries - FCC Approvals and Licenses - No Amendments, Etc. - Further Assurances The covenants, to the extent applying to Acquiror Subsidiaries, shall expressly include the Company and its Subsidiaries; provided, that any condition with respect to the Company and its Subsidiaries, which would otherwise violate the provisions of any covenant, shall be deemed to be permitted under such covenants to the extent that such condition existed prior to the consummation of the Merger; provided, further, that to the extent the Bridge Facility contains special limitations applicable solely to the "High Yield Subsidiaries", such special limitations shall be included in the Discrepancy Note Agreement only to the extent that such limitations are also contained in the Term Credit and Revolving Credit Facilities. Events of Default: Events of Default shall include the following (subject to qualifications reasonably acceptable to the Issuer and the Holders): - Payment default under any Note Document - Specified covenant defaults without cure period - Specified covenant defaults with 20 day cure period - Incorrect representation, warranty, certification or statement - Cross-payment default to any Indebtedness or Contingent Obligation having an aggregate principal and face amount of more than $5,000,000 - Cross-default to the Revolving Credit Agreement and the related Shareholder Guaranty documents - Cross-acceleration default to any Indebtedness or Contingent Obligation having an aggregate principal and face amount of more than $5,000,000 - Voluntary bankruptcy event; - Involuntary bankruptcy event; - ERISA Event; - Monetary judgments, decrees, etc. involving more than an amount equal to the greater of (i) $5,000,000 and (ii) 10% of the Issuer's net worth; - Non-monetary judgments which could reasonably be expected to have a Material Adverse Effect; - Invalidity and third party violation of the Note Documents; failure of security interests, etc.; - FCC and Governmental Authority revocation, etc., of licenses, permits, etc. - Change in Control Tax Indemnification: Comparable to provisions currently set forth in the existing Term Credit, Revolving Credit and Bridge Facilities Expenses; Indemnification: Comparable to provisions currently set forth in the existing Term Credit, Revolving Credit and Bridge Facilities Governing Law: New York. Senior Indebtedness: The Notes shall constitute "Senior Indebtedness" and, to the maximum extent permitted, "Designated Senior Indebtedness" under the Indenture and the Revolving Credit Facility Guaranties. References: It is understood that all references to the existing Revolving Credit Facility herein shall include all amendments effected by Bank Waiver No. 3, and any other amendments and modifications thereto permitted in accordance with the terms of the Merger Agreement. The Agent: Comparable to provisions currently set forth in the existing Term Credit and Revolving Credit Facilities, except that the Agent shall be an entity designated by the Holders Documentation: Documentation and all additional terms, conditions and provisions shall be reasonably acceptable to the Issuer and the Holders acting in good faith