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XM SATELLITE RADIO HOLDINGS INC.
XM SATELLITE RADIO INC.
$89,042,387
Series GM Senior Secured Convertible Notes
Due December 31, 2009
-----------------
NOTE PURCHASE
AGREEMENT
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Dated as of December 21, 2002
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. DEFINITIONS...................................................................1
2. PURCHASE AND SALE OF THE NOTES; CLOSING......................................19
3. INTEREST AND REPAYMENT.......................................................19
3.1. Interest on the Notes...............................................19
3.2. Interest after Maturity.............................................20
3.3. Payments and Computations...........................................20
3.4. Payment at Maturity or Upon Conversion..............................20
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF XM.............................21
4.1. Incorporation, Standing, etc........................................21
4.2. Subsidiaries........................................................21
4.3. SEC Reports.........................................................21
4.4. Qualification.......................................................22
4.5. Authorization of Agreement and Notes................................22
4.6. Absence of Defaults and Conflicts...................................22
4.7. Absence of Proceedings..............................................23
4.8. Possession of Licenses and Permits..................................23
4.9. No Violations of Laws...............................................23
4.10. Internal Accounting Controls........................................23
4.11. Tax Returns and Payments............................................24
4.12. Indebtedness........................................................24
4.13. Title to Properties; Liens..........................................24
4.14. Patents, Trademarks, Authorizations, etc............................24
4.15. Governmental Consents...............................................24
4.16. Restrictions........................................................24
4.17. Capitalization......................................................25
4.18. Seniority of Notes..................................................25
4.19. Material Events.....................................................25
4.20. Financial Statements................................................26
4.21. No Undisclosed Fees.................................................26
4.22. No Transactions with Affiliates.....................................26
4.23. Registration Rights.................................................26
4.24. Private Placement...................................................26
4.25. Acknowledgement Regarding Investor's Purchase of the Note...........27
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR...............................27
5.1. Risks of Investment.................................................27
5.2. Investment Experience...............................................27
5.3. Ability to Bear Risk................................................27
5.4. Receipt and Review of Documentation.................................27
5.5. Acquisition for Own Account.........................................28
5.6. No Public Market; Rule 144..........................................28
5.7. Organization, Good Standing, Corporate Authority....................28
5.8. Due Authorization...................................................28
5.9. Qualified Institutional Buyer, Accredited Investor..................28
5.10. Acknowledgement Regarding Investor's Purchase of Notes..............28
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
6. RESTRICTIONS ON TRANSFER.....................................................29
7. COVENANTS....................................................................29
7.1. Payment of Note and Maintenance of Office...........................29
7.2. Reports.............................................................30
7.3. Taxes...............................................................30
7.4. Stay, Extension and Usury Laws......................................30
7.5 Restricted Payments.................................................30
7.6. Dividend and Other Payment Restrictions Affecting Material
Subsidiaries........................................................31
7.7. Incurrence of Indebtedness and Issuance of Preferred Stock..........32
7.8. Asset Sales.........................................................35
7.9. Transactions with Affiliates........................................37
7.10. Liens...............................................................38
7.11. Corporate Existence.................................................38
7.12. Offer to Repurchase Upon Change of Control..........................38
7.13. Limitation on Sale and Leaseback Transactions.......................39
7.14. Limitation on Issuances and Sales of Equity Interests of Material
Subsidiaries........................................................39
7.15. Insurance...........................................................39
7.16. Merger, Consolidation, or Sale of Assets............................40
7.17. Hart-Scott-Rodino...................................................41
7.18. Reimbursement.......................................................41
7.19. Avoidance of Conflicts..............................................42
8. DEFAULTS AND REMEDIES........................................................42
8.1. Events of Default...................................................42
8.2. Acceleration........................................................43
8.3. Other Remedies......................................................44
8.4. Waiver of Past Defaults.............................................44
8.5. Control by Majority.................................................44
8.6. Rights of Holders of Notes to Receive Payment.......................44
9. CONVERSION PROVISIONS........................................................45
9.1. Optional Conversion Right...........................................45
9.2. Exercise of Optional Conversion Right...............................45
9.3. Issuance of Certificates............................................46
9.4. No Fractional Shares................................................46
9.5. Merger of Holdings..................................................46
9.6. Reclassification of Class A Common Stock............................47
9.7. Reservation of Class A Common Stock.................................47
9.8. Taxes...............................................................47
9.9. No Rights or Liabilities as Stockholders............................48
9.10. Limitation on Conversion............................................48
10. REGISTRATION, TRANSFER AND SUBSTITUTION OF NOTE..............................48
10.1. Note Register.......................................................48
10.2. Transfer and Conversion of Note.....................................49
10.3. Replacement of Note.................................................49
11. GUARANTEES...................................................................49
11.1. Execution and Delivery of Agreement Guarantees......................49
11.2. Subsidiary Guarantors may Consolidate, Etc. on Certain Terms........50
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
11.3. Releases Following Sale of Assets...................................50
11.4. Application of Certain Terms and Provisions to Holdings and the
Subsidiary Guarantors...............................................50
12. SECURITY AGREEMENTS..........................................................51
12.1. Security Agreements.................................................51
12.2. Release of Collateral...............................................51
12.3. Termination of Security Interest....................................51
13. CONDITIONS TO CLOSING........................................................52
13.1 Conditions to Obligations of the Investor...........................52
13.2 Conditions to the Obligations of the Obligors.......................53
14. EXPENSES.....................................................................53
15. SURVIVAL.....................................................................53
16. AMENDMENTS AND WAIVERS.......................................................53
17. NOTICES......................................................................54
18. EXECUTION IN COUNTERPARTS....................................................55
19. BINDING EFFECT...............................................................55
20. GOVERNING LAW; CHOICE OF FORUM; JURY TRIAL WAIVER............................55
21. MISCELLANEOUS................................................................56
21.1. Severability........................................................56
21.2. No Waiver...........................................................56
21.3. Further Assurances..................................................56
21.4. Construction........................................................56
</TABLE>
iii
<PAGE>
Exhibit A Form of Note
Exhibit B Form of Security Agreement
Exhibit C Form of Amended and Restated Security Agreement
Exhibit D Form of Noteholders Agreement
Exhibit E Form of Registration Rights Agreement
Exhibit F Form of Second Amended Distribution Agreement
Exhibit G Form of Agreement Guarantee
Exhibit H Form of GM Loan Agreement
Exhibit I Form of Director Agreement
iv
<PAGE>
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT, dated as of December 21, 2002, by and
among XM SATELLITE RADIO INC., a Delaware corporation (the "Company"), XM
SATELLITE RADIO HOLDINGS INC., a Delaware corporation and the sole stockholder
of the Company ("Holdings" and, together with the Company and Holdings, the
"Obligors" or "XM"), and OnStar Corporation, a Delaware corporation (the
"Investor" or "OnStar") (collectively, the "Parties," and each, a "Party").
WITNESSETH
WHEREAS, the Obligors are engaged in the development of a
satellite digital audio radio service in the United States;
WHEREAS, the Obligors require significant incremental capital to
fund their operations and are in the process of attempting to restructure
certain of their obligations under their outstanding securities and other
contractual obligations;
WHEREAS, as part of XM's refinancing efforts, the Obligors desire
to eliminate the Company's obligations under the terms of Section 4(a) of the
certain Amended and Restated Distribution Agreement, dated as of June 3, 1999,
by and between the Company and OnStar (the "Distribution Agreement"), to make
guaranteed payments to OnStar through December 31, 2006 in exchange for the
issuance to the Investor of a Series GM Senior Secured Convertible Note in
aggregate principal amount of $89,042,387 (the "Note" and together with any
Notes issued in substitution or exchange therefor pursuant to this Agreement,
the "Notes"), substantially in the form attached hereto as Exhibit A;
WHEREAS, as an inducement to the Investor to accept the Note and
agree to the elimination of OnStar's rights to receive such guaranteed payments
through December 31, 2006, the Obligors will enter into (a) the General Security
Agreement, substantially in the form attached hereto as Exhibit B, (b) the
Company will enter into the FCC License Subsidiary Pledge Agreement,
substantially in the form attached hereto as Exhibit C, (c) Holdings will enter
into the Noteholders Agreement and Director Agreement, substantially in the
forms attached hereto as Exhibit D and Exhibit I, respectively, (d) Holdings
will enter into the Registration Rights Agreement, substantially in the form
attached hereto as Exhibit E, and (e) the Company will cause its subsidiary XM
Equipment Leasing LLC to enter into, on the Closing Date referred to below, such
General Security Agreement and an Agreement Guarantee, substantially in the form
attached hereto as Exhibit F, and will cause certain other subsidiaries to enter
into similar agreements in the circumstances described herein;
WHEREAS, on the terms and subject to the conditions set forth
herein, the Investor is willing to accept the Note and cause OnStar to agree to
eliminate its rights to receive such guaranteed payments through December 31,
2006; and
WHEREAS, the Parties desire to set forth the terms and conditions
of and to provide for the issuance by the Obligors of the Note described herein.
NOW THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Parties hereby agree as
follows:
1. DEFINITIONS
The following terms when used in this Agreement, including its
preamble and recitals, shall, except where the context otherwise requires, have
the following meanings (such meanings to be equally applicable to the singular
and plural forms thereof):
"Accredited Investor" has the meaning set forth in Rule 501(a)
under the Securities Act.
<PAGE>
"Acquired Debt" means, with respect to any specified Person (x)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person or (y)
Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person, provided that, in each case, such Indebtedness or Lien, as applicable,
is not incurred in connection with, or in contemplation of, such other Person
merging with or into, or becoming a Subsidiary of, such specified Person.
"Adjusted Consolidated Operating Cash Flow" means, with respect to
an Obligor, the Consolidated Operating Cash Flow of such Obligor for the latest
four fiscal quarters for which consolidated financial statements of such Obligor
are available, taken as a whole. For purposes of calculating Consolidated
Operating Cash Flow for any four fiscal quarter period for purposes of this
definition, all Subsidiaries of an Obligor on the date of the transaction giving
rise to the need to calculate Adjusted Consolidated Operating Cash Flow (the
"Transaction Date") shall be deemed to have been Subsidiaries of such Obligor at
all times during such four fiscal quarter period.
In addition, for purposes of calculating Adjusted Consolidated
Operating Cash Flow:
(1) acquisitions that have been made by the specified Obligor
or any of its Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the calculation
date shall be given pro forma effect as if they had occurred on the first day of
the four-quarter reference period and Adjusted Consolidated Operating Cash Flow
for such reference period shall be calculated on a pro forma basis; and
(2) the Consolidated Operating Cash Flow attributable to
discontinued operations of such Obligor or its Subsidiaries, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
calculation date, shall be excluded.
"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," 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; provided that beneficial ownership of 10%
or more of the Voting Stock of a Person shall be deemed to be control. For
purposes of this definition, the terms "controlling," "controlled by" and "under
common control with" shall have correlative meanings.
"Affiliate Transaction" has the meaning set forth in Section 7.9
of this Agreement.
"Agreement" means this Note Purchase Agreement (including any
Schedules and Exhibits hereto), as it may from time to time be amended,
supplemented or modified in accordance with its terms.
"Agreements and Instruments" have the meaning specified in Section
4.6 of this Agreement.
"Agreement Guarantee" means (1) the Guarantee, dated as of the
Closing Date, entered into by XM Leasing Subsidiary in favor of the Holders and
(2) any other Guarantee entered into by a Subsidiary Guarantor in favor of the
Holders pursuant to the terms of Section 11.1 hereof.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any
assets; provided that the sale, conveyance or other disposition of all or
substantially all of the assets of an Obligor and its Subsidiaries taken as a
whole will be governed by the provisions of Sections 7.12 and 7.16(a) hereof and
not by the provisions of Section 7.8 hereof; and
(2) the issuance or sale of new Equity Interests, or the sale
or other disposition of outstanding Equity Interests of an Obligor's Subsidiary.
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Notwithstanding the preceding, the following items shall not be
deemed to be Asset Sales:
(1) any single transaction or series of related transactions
that involves assets having a fair market value or that involve net proceeds of
less than $1,000,000;
(2) a transfer of assets between or among either Obligor and
any of its Wholly Owned Subsidiaries,
(3) an issuance of Equity Interests by a Wholly Owned
Subsidiary to an Obligor or to another Wholly Owned Subsidiary;
(4) the sale or lease of equipment, inventory, accounts
receivable or other assets in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents;
(6) a Restricted Payment or Permitted Investment that is
permitted by Section 7.5 hereof;
(7) any Qualified Sale and Leaseback Transaction; and
(8) the sale by XM Building Subsidiary of its real property
located at 1500 Eckington Place, NE, Washington, DC and related improvements.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value of the obligation of the
lessee for net rental payments during the remaining term of the lease included
in such sale and leaseback transaction including any period for which such lease
has been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular "person" (as that term is used in Section
13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire by
conversion or exercise of other securities, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition. The terms "Beneficially Owns" and "Beneficially Owned" shall have
corresponding meanings.
"Board of Directors" means:
(1) with respect to a corporation, the board of directors of
the corporation;
(2) with respect to a partnership, the Board of Directors of
the general partner of the partnership; and
(3) with respect to any other Person, the board or committee of
such Person serving a similar function.
"Board Resolution" means, with respect to an Obligor, a resolution
duly adopted by the Board of Directors of such Obligor or a committee of the
Board of Directors in the case of Holdings, certified by the Secretary or an
Assistant Secretary of such Obligor to have been duly adopted and to be in full
force and effect on the date of such certification.
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<PAGE>
"Business Day" means any day other than a Saturday, a Sunday or a
day on which banking institutions in the City of New York or at a place of
payment are authorized by law, regulation or executive order to remain closed.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at that time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or
insured by the United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of not more than six months from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any domestic commercial bank having capital and
surplus in excess of $500,000,000;
(4) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having one of the two highest ratings
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating
Services and in each case maturing within six months after the date of
acquisition; and
(6) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (1) through (5) of
this definition.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the properties or assets
of an Obligor and its Subsidiaries taken as a whole to any "person" (as that
term is used in Section 13(d)(3) of the Exchange Act) other than a Principal or
a Related Party of a Principal;
(2) the adoption of a plan relating to the liquidation or
dissolution of an Obligor (other than a liquidation or dissolution of the
Company into Holdings);
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(3) the consummation of any transaction (including any merger
or consolidation) the result of which is that any "person", other than the
Principals and their Related Parties, becomes the Beneficial Owner, directly or
indirectly, of more than 50% of the Voting Stock of Holdings or the Company,
measured by voting power rather than number of shares;
(4) the first day on which a majority of the members of the
Board of Directors of an Obligor are not Continuing Directors;
(5) an Obligor consolidates with, or merges with or into, any
Person, or any Person consolidates with, or merges with or into, an Obligor, in
any such event pursuant to a transaction in which any of the outstanding Voting
Stock of such Obligor or such other Person is converted into or exchanged for
cash, securities or other property, other than any such transaction where the
Voting Stock of an Obligor outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance); or
(6) the first day on which the Company ceases to be a Wholly
Owned Subsidiary of Holdings.
Notwithstanding the foregoing, neither the Concurrent Financing
Transactions nor a Parent Company Merger shall constitute a "Change of Control".
"Class A Common Stock" means the Class A Common Stock, par value
$0.01 per share, of Holdings.
"Closing" means the consummation of the transactions contemplated
by this Agreement, including the sale and purchase of the Notes.
"Closing Date" means the date of the Closing.
"Collateral" means (1) the Collateral (as defined in the General
Security Agreement), and (2) the Collateral (as defined in the FCC License
Subsidiary Pledge Agreement).
"Collateral Agent" means the collateral agent under the applicable
Intercreditor Agreement.
"Company" means XM Satellite Radio Inc., a Delaware corporation
and direct Wholly Owned Subsidiary of Holdings, and any and all successors
thereto.
"Concurrent Financing Transactions" means (1) the issuance of the
Obligors' 10% Senior Secured Discount Convertible Notes due 2009 to certain new
investors in an initial aggregate principal amount of $[185,000,000] (the "New
Notes"), (2) the amendment of the Distribution Agreement to provide for, among
other things, the issuance of the Notes and the payment of up to $35,000,000 in
subscriber bounty payments in the form of Class A Common Stock, (3) the issuance
of the Company's 14% Senior Secured Discount Notes due 2009, warrants to
purchase Class A Common Stock (the "Exchange Warrants") and cash in exchange for
some or all of the Company's outstanding 14% Senior Secured Notes due 2010 (the
"Existing Notes"), (4) the Obligors' entering into a $100,000,000 Senior Secured
Credit Facility with General Motors Corporation (the "GM Loan Agreement") to
finance certain revenue share payments owed to the Investor under the
Distribution Agreement or other amounts which may be owed to the Investor or
General Motors Corporation, (5) the issuance of a warrant to the Investor to
purchase 10,000,000 shares of Class A Common Stock (the "GM Warrant"), (6) the
issuance and sale on or before the Closing Date, to the extent determined to be
desirable by Holdings, or after the Closing Date to the extent contemplated by
the letter agreement between Holdings and the BayStar Group, of Class A Common
Stock, with or without warrants to purchase Class A Common Stock, in accordance
with Section 4(2) of the Securities Act or pursuant to a registration statement
under the Securities Act, all of which transactions shall be on terms
substantially as previously disclosed to the Investor or otherwise on terms
reasonably satisfactory to the Investor, including the proposed sale of
5,555,556 shares of Class A Common Stock to US Trust Company (the "US Trust
Purchase") and
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warrants to purchase 900,000 shares of Class A Common Stock, and (7) execution,
delivery and performance of all agreements, documents and instruments including
the Noteholders Agreement, Director Agreement and Registration Rights Agreement,
in substantially the form previously provided to the Investor, evidencing the
transactions described in clauses (1) through (6) of this definition and
arrangements contemplated thereby.
"Concurrent Financing Transactions Issuances" means the issuances
or potential issuances of: (a) Class A Common Stock upon conversion of the New
Notes and the Notes; (b) the GM Warrant and Class A Common Stock upon exercise
thereof; (c) the Exchange Warrants and Class A Common Stock upon exercise
thereof; (d) Class A Common Stock as payment of interest on the GM Notes in
accordance with the terms thereof; (e) Class A Common Stock as payment of
interest under the GM Loan Agreement in accordance with the terms thereof; (f)
Class A Common Stock pursuant to the Distribution Agreement in accordance with
the terms thereof; and (g) Class A Common Stock and warrants issued and sold as
contemplated by clause (6) of the definition of Concurrent Financing
Transactions, including the US Trust Purchase and including Class A Common Stock
upon exercise of such warrants.
"Consolidated Net Income" means, with respect to an Obligor for
any period, the aggregate of the Net Income of such Obligor and its Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that:
(1) the Net Income (but not loss) of an Obligor's Subsidiary
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to such
Obligor or a Subsidiary thereof;
(2) the Net Income of an Obligor's Subsidiary shall be excluded
to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders;
(3) the Net Income of an Obligor's Subsidiary acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded; and
(4) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to a specified Person
as of any date, the sum of:
(1) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date; plus
(2) the respective amounts reported on such Person's balance
sheet as of such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to the
extent of any cash received by such Person upon issuance of such preferred
stock.
"Consolidated Operating Cash Flow" means, with respect an Obligor
for any period, the Consolidated Net Income of such Obligor for such period,
plus:
(1) an amount equal to any extraordinary loss plus any net loss
realized by such Obligor or any of its Subsidiaries in connection with an Asset
Sale, to the extent such losses were deducted in computing such Consolidated Net
Income; plus
(2) any provision for taxes based on income or profits of such
Obligor and its Subsidiaries for such period, to the extent that such provision
for taxes was deducted in computing such Consolidated Net Income; plus
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(3) consolidated interest expense of such Obligor and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations and Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net of the effect of all payments made or received
pursuant to Hedging Obligations), to the extent that any such expense was
deducted in computing such Consolidated Net Income; plus
(4) depreciation, amortization (including amortization of
goodwill and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other non-cash expenses
(excluding any such non-cash expense to the extent that it represents an accrual
of or reserve for cash expenses in any future period or amortization of a
prepaid cash expense that was paid in a prior period) of such Obligor and its
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash expenses were deducted in computing such Consolidated Net
Income; minus
(5) non-cash items increasing such Consolidated Net Income for
such period, other than the accrual of revenue in the ordinary course of
business, in each case, on a consolidated basis and determined in accordance
with GAAP.
Notwithstanding the preceding, the provision for taxes based on
the income or profits of, and the depreciation and amortization and other
non-cash expenses of, a Subsidiary of an Obligor shall be added to Consolidated
Net Income to compute Consolidated Operating Cash Flow of such Obligor only to
the extent that a corresponding amount would be permitted at the date of
determination to be dividended to such Obligor by such Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Continuing Directors" means, with respect to an Obligor as of any
date of determination, any member of the Board of Directors of such Obligor who:
(1) was a member of such Board of Directors on the date hereof;
or
(2) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.
"Conversion" means the conversion of all or a portion of the
aggregate principal amount outstanding under the Note, together with accrued but
unpaid premium and interest thereon, into shares of Class A Common Stock in
accordance with the provisions of Section 9 of this Agreement.
"Conversion Price" means ninety percent (90%) of the Fair Market
Value of the Class A Common Stock on the Vesting Date, rounded to the nearest
whole cent; provided, however, that the Conversion Price shall in no event be
(i) less than $5.00 per share nor greater than $10.00 per share during the year
ended December 31, 2003; (ii) less than $5.00 per share nor greater than $15.00
per share during the year ended December 31, 2004; or (iii) less than $5.00 per
share nor greater than $20.00 per share at any time on or after January 1, 2005.
"Conversion Stock" means the shares of Class A Common Stock that
may be issued upon Conversion, in accordance with the provisions of Section 9 of
this Agreement.
"Core XM Radio Assets" means XM Radio Assets reasonably necessary
to operate the XM Radio Business.
"Cumulative Available Cash Flow" means, as at any date of
determination, the positive cumulative Consolidated Operating Cash Flow realized
during the period commencing on the beginning of the first fiscal quarter
following the date hereof and ending on the last day of the most recent fiscal
quarter immediately preceding the date of determination for which consolidated
financial information of Holdings is available or, if such
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cumulative Consolidated Operating Cash Flow for such period is negative, the
negative amount by which cumulative Consolidated Operating Cash Flow is less
than zero.
"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.
"Director Agreement" means the Agreement, dated as of the Closing
Date, by and among Holdings, AEA XM Investors I LLC, AEA XM Investors II LLC,
AEA XM Investors IA LLC, AEA XM Investors IIA LLC, Columbia XM Radio Partners,
LLC, Columbia XM Satellite Partners III, LLC, Columbia Capital Equity Partners
II (QP), L.P., Columbia Capital Equity Partners III (QP), L.P., Clear Channel
Investments, Inc., Hughes Electronics Corporation, Madison Dearborn Capital
Partners III, L.P., Madison Dearborn Special Equity III, L.P., Special Advisors
Fund I, LLC and American Honda Motor Co., Inc., as such agreement may be
amended, modified or supplemented from time to time.
"Disqualified Stock" means any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible, or for which it
is exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to April 1, 2010. Notwithstanding the
preceding sentence, any Capital Stock that would constitute Disqualified Stock
solely because the holders thereof have the right to require the issuer thereof
to repurchase such Capital Stock upon the occurrence of a change of control or
an asset sale shall not constitute Disqualified Stock if the terms of such
Capital Stock provide that such issuer may not repurchase or redeem any such
Capital Stock pursuant to such provisions unless such repurchase or redemption
complies with Section 7.5 of this Agreement.
"Distribution Agreement" has the meaning set forth in the recitals
hereof.
"Equity Interests" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).
"Event of Default" has the meaning set forth in Section 8.1 of
this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Act Filings" has the meaning set forth in Section 4.3 of
this Agreement.
"Existing Indebtedness" means Indebtedness of an Obligor and its
Subsidiaries in existence on the date hereof, including the Indebtedness
incurred or to be incurred pursuant to the Concurrent Financing Transactions,
until such amounts are repaid.
"Fair Market Value" means, with respect to the Class A Common
Stock, the average, calculated to two decimal places, of the weighted average
daily trading prices of such stock over the ten Trading Day period ending on the
Trading Day prior to calculation thereof as reported on Bloomberg. If at any
time the Class A Common Stock is not listed on any national securities exchange
or quoted on the Nasdaq Stock Market or the over-the-counter market, the Fair
Market Value of the Class A Common Stock shall be the fair value thereof as
determined by the Board of Directors of Holdings in good faith.
"FCC License Subsidiary" means XM Radio Inc., a Delaware
corporation and direct Wholly Owned Subsidiary of the Company.
"FCC License Subsidiary Pledge Agreement" means the agreement,
dated as of the Closing Date, among the Company, the Collateral Agent and the
other parties thereto, providing for the pledge of the stock of the FCC License
Subsidiary as security for the Notes and certain other indebtedness.
"FCC License Subsidiary Pledge Intercreditor Agreement" means the
Intercreditor and Collateral Agency Agreement, dated as of the Closing Date,
pursuant to which the collateral agent named therein will be
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appointed on behalf of the various secured creditor parties to serve as
collateral agent under the FCC License Subsidiary Pledge Agreement.
"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 from time to time.
"General Intercreditor Agreement" means the Intercreditor and
Collateral Agency Agreement, dated as of the Closing Date, pursuant to which the
collateral agent named therein will be appointed on behalf of the various
secured creditor parties to serve as collateral agent under the General Security
Agreement.
"General Security Agreement" means the agreement, dated as of the
Closing Date, among the Obligors, XM Leasing Subsidiary, the Collateral Agent
and the Subsidiary Guarantors from time to time, providing for a grant of
security interest in certain assets of the Company as security for the Notes and
certain other indebtedness.
"GM Loan Agreement" means the Credit Agreement, to be executed at
the Closing, by and between the Investor and the Obligors, as such agreement may
be amended, modified or supplemented from time to time.
"Governmental Approval" means the authorization, consent,
approval, license, ruling, permit, certification, exemption, filing or
registration by or with a Governmental Entity required by applicable
requirements of law to be obtained or held in connection herewith or with the
Concurrent Financing Transactions.
"Governmental Entity" means any international body or any nation
or government, any state of political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government any corporation or other entity owned or controlled,
through stock or capital or otherwise, by any of the foregoing.
"Governmental Licenses" has the meaning set forth in Section 4.8
of this Agreement.
"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.
"Guarantee" means a guarantee other than by endorsement of
negotiable instruments for collection in the ordinary course of business, direct
or indirect, in any manner including by way of a pledge of assets or through
letters of credit or reimbursement agreements in respect thereof, of all or any
part of any Indebtedness.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Hedging Obligations" means, with respect to any specified Person,
the obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates or currency values.
"Holder" means a Person in whose name a Note is registered.
"Holdings" means XM Satellite Radio Holdings Inc. and any and all
successors thereto.
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"Hughes Repeater Contract" means the Contract for the Design,
Development and Purchase of Terrestrial Repeater Equipment by and between the
Company and Hughes Electronics Corporation, dated February 14, 2000 as amended
from time to time provided that such amendments, taken as a whole, shall not be
materially adverse to the Company.
"Hughes Repeater Escrow Agreement" means the agreement between the
Company and Hughes Electronics Corporation, dated as of March 2, 2000, providing
for the escrow of funds payable under the Hughes Repeater Contract.
"Hughes Satellite Agreement" means the Satellite Purchase
Agreement between the Company and Hughes Space and Communications Inc., dated
July 21, 1999, as in effect on the date hereof and as it may be amended from
time to time in any respect other than with respect to the terms or scope of the
security interest granted by the Company thereunder.
"incur" has the meaning set forth in Section 7.7 hereof.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of
any property, except any such balance that constitutes an accrued expense or
trade payable; or
(6) representing any Hedging Obligations;
if and to the extent any of the preceding items (other than
letters of credit and Hedging Obligations) would appear as a liability upon a
balance sheet of the specified Person prepared in accordance with GAAP. In
addition, the term "Indebtedness" shall include (a) all Indebtedness of others
secured by a Lien on any asset of the specified Person (whether or not such
Indebtedness is assumed by the specified Person), (b) to the extent not
otherwise included, the Guarantee by the specified Person of any indebtedness of
any other Person and (c) all Attributable Debt of such Person.
The amount of any Indebtedness outstanding as of any date shall
be:
(1) the accreted value thereof, in the case of any Indebtedness
issued with original issue discount; and
(2) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means the Indenture, dated as of the Closing Date,
among the Company, each of the Guarantors named therein, and The Bank of New
York, as Trustee, as amended or supplemented from time to time.
"Intercreditor Agreements" means the General Intercreditor
Agreement and the FCC License Subsidiary Pledge Intercreditor Agreement.
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"Interest Payment Date" means June 30 and December 31 of each
year, commencing June 30, 2003, provided that if any Interest Payment Date is
not a Business Day, the Interest Payment Date will be deferred and interest will
be payable through the next Business Day.
"Interest Rate" means a rate per annum of 10% of the outstanding
principal amount of the Note.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended.
"Investments" means, with respect to an Obligor, all direct or
indirect investments by such Obligor in other Persons (including Affiliates) in
the form of loans (including Guarantees or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers, directors and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
The acquisition by an Obligor or any Subsidiary of such Obligor of a Person that
holds an Investment in a third Person shall be deemed to be an Investment by
such Obligor in such third Person in an amount equal to the fair market value of
the Investment held by the acquired Person in such third Person determined as
provided in the final paragraph of Section 7.5 hereof.
"Investor" has the meaning set forth in the recitals to this
Agreement.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law, including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction.
"material" means individually or in the aggregate (i) material in
relation to the business, operations, affairs, assets, liabilities, financial
condition, or properties of Holdings and its Subsidiaries taken as a whole or
(ii) having a value or worth, individually, or when combined with breaches of
any other representation, warranty or covenant (without giving effect to any
materiality or Material Adverse Effect qualifiers contained therein), in excess
of $10,000,000, provided, however, that any individual breaches or violations
having a value or worth below $100,000, shall not be combined with breaches of
any other representation, warranty or covenant for purposes of calculating the
$10,000,000 threshold.
"Material Subsidiary" means with respect to an Obligor, a
Subsidiary of such Obligor (1) the business, operations, affairs, assets,
liabilities, financial condition, or properties of which are material to the
business, operations, affairs, assets, liabilities, financial condition, or
properties of the Obligors and their Subsidiaries taken as a whole, (2) owning
assets having an aggregate book value greater than $10,000,000 or (3) that has
been designated by the Board of Directors as a Material Subsidiary.
Notwithstanding the foregoing, "Material Subsidiary" shall not include the
Subsidiary contemplated by clause (10) of the definition of "Permitted
Investments" herein.
"Material Adverse Effect" means individually or in the aggregate
(i) a material adverse effect on the business, operations, affairs, assets,
liabilities, financial condition or properties of Holdings and its Subsidiaries
taken as a whole, (ii) a material adverse effect on the ability of Holdings or
any of its Subsidiaries to perform their respective obligations under this
Agreement or any of the Transaction Documents, or (iii) an economic cost or
liability, individually, or when combined with breaches of any other
representation, warranty or covenant (without giving effect to any materiality
or Material Adverse Effect qualifiers contained therein), to Holdings or any of
its Subsidiaries in excess of $10,000,000, in each case other than continued
deferrals of vendor payments; provided, however, that any individual breaches or
violations having an economic cost or resulting in a liability below $100,000
shall not be combined with breaches of any other representation, warranty or
covenant for purposes of calculating the $10,000,000 threshold.
"Maturity Date" means December 31, 2009.
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"Net Income" means, with respect to an Obligor or a Subsidiary of
an Obligor, the net income (loss) of such Person and its Subsidiaries,
determined in accordance with GAAP and before any reduction in respect of
preferred stock dividends, excluding, however:
(1) any gain or loss, together with any related provision for
taxes on such gain or loss, realized in connection with: (a) any Asset Sale; or
(b) the disposition of any securities by such Person or any of its Subsidiaries
or the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries; and
(2) any extraordinary gain or loss, together with any related
provision for taxes on such extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by an
Obligor or any of its Material Subsidiaries in respect of any Asset Sale or
other transaction (including any cash received upon the sale or other
disposition or any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale or other transaction, including
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof, in each case, after taking into account any available tax
credits or deductions and any tax sharing arrangements, and amounts required to
be applied to the repayment of Indebtedness secured by a Lien on the asset or
assets that were the subject of such Asset Sale or other transaction and any
reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
"Note" has the meaning set forth in the recitals hereof.
"Noteholders Agreement" means the Second Amended and Restated
Shareholders and Noteholders Agreement, dated as of the Closing Date, by and
among Holdings and the other parties named on the signature pages thereof, as
such agreement may be amended, modified or supplemented from time to time.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Obligors" means Holdings and the Company.
"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 or any Vice-President of such Person.
"Officers' Certificate" means, with respect to any Person, a
certificate signed on behalf of such Person by two Officers of such Person.
"OnStar" has the meaning set forth in the recitals hereto.
"Parent Company Merger" means (a) a merger or consolidation of the
Company with or into Holdings or a merger or consolidation of Holdings with or
into the Company, provided that the holders of Voting Stock of Holdings
immediately prior to such transaction own substantially all of the Voting Stock
of the surviving entity immediately after such transaction, or (b) any
assignment, transfer, conveyance or other disposition of all or substantially
all of the properties or assets of the Company to Holdings or of Holdings to the
Company.
"Pari Passu Indebtedness" means, with respect to an Obligor,
Indebtedness of such Obligor that is pari passu in right of payment to the
Notes.
"Permitted Business" means any of the lines of business conducted
by an Obligor and its Subsidiaries on the date hereof and any business similar,
ancillary or related thereto or that constitutes a reasonable extension or
expansion thereof, including in connection with such Obligor's existing and
future technology, trademarks and patents.
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"Permitted Investments" means:
(1) any Investment in a Wholly Owned Subsidiary of Holdings;
(2) any Investment in Cash Equivalents;
(3) any Investment by an Obligor or any Subsidiary of an
Obligor in a Person, if as a result of such Investment:
(a) such Person becomes a Wholly Owned Subsidiary of such
Obligor; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, such Obligor or a Wholly Owned Subsidiary of such Obligor;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with Section 7.8;
(5) any acquisition of assets solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of Holdings;
(6) Hedging Obligations;
(7) Investments in existence on the date hereof and
modifications thereof (but not including any increase in the amount of such
Investment);
(8) Investments in securities of trade creditors or customers
received in compromise of obligations of such Person incurred in the ordinary
course of business, including under any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of such Person;
(9) Investments indirectly acquired by an Obligor or any of its
Subsidiaries through a direct Investment in another Person made in compliance
with this Agreement, provided that such Investments existed prior to and were
not made in contemplation of such acquisition;
(10) Investments in a joint venture with Sirius Satellite Radio,
Inc., or an affiliate or successor thereof, the proceeds of which investments
are used solely to develop interoperable radio technology capable of receiving
and processing radio system signals broadcast by both the Company and Sirius
Satellite Radio Inc., for the licensing of other satellite radio technology from
the Company and Sirius Satellite Radio, Inc. in connection therewith and for
activities reasonably ancillary thereto in accordance with the Joint Development
Agreement between the Company and Sirius Satellite Radio, Inc., as in effect on
the date hereof or as it may be amended in a manner not materially adverse to
the Company; and
(11) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (11) since the date hereof that
are at the time outstanding not to exceed $10,000,000.
"Permitted Liens" means:
(1) Liens on any assets of an Obligor or its Material
Subsidiaries securing Pari Passu Indebtedness incurred pursuant to clause (i) of
Section 7.7 hereof or Permitted Refinancing Indebtedness in respect thereof;
provided that the Notes shall be equally and ratably secured by such assets;
(2) Liens in favor of an Obligor;
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(3) Liens on property, or on shares of stock or Indebtedness,
of a Person existing at the time such Person is merged with or into or
consolidated with an Obligor or any Subsidiary of an Obligor; provided that such
Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with such Obligor or the Subsidiary;
(4) Liens on property existing at the time of acquisition
thereof by an Obligor or any Subsidiary of an Obligor, provided that such Liens
were not incurred in contemplation of such acquisition;
(5) Liens to secure the performance of bids, tenders, leases,
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business;
(6) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (vi) of the third paragraph of Section 7.7
hereof covering only the assets acquired, constructed or improved with such
Indebtedness;
(7) Liens existing on the date hereof (including Liens arising
under the Prior Indenture in favor of the trustee thereunder and Liens under the
Hughes Repeater Escrow Agreement) and Liens securing Indebtedness incurred
pursuant to the Concurrent Financing Transactions;
(8) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor;
(9) Liens securing the Notes;
(10) Liens that (a) are incidental to the conduct of an
Obligor's or a Material Subsidiary's business or the ownership of its property
and assets not securing Indebtedness, and (b) do not in the aggregate materially
detract from the value of the assets or property of such Obligor and its
Subsidiaries taken as a whole, or materially impair the use thereof in the
operation of its business;
(11) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security;
(12) judgment Liens which do not give rise to an Event of
Default;
(13) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not interfering in
any material respect with the ordinary conduct of the business of an Obligor or
any of its Subsidiaries;
(14) any interest or title of a lessor under any Capital Lease
Obligation;
(15) leases or subleases granted to others that do not
materially interfere with the ordinary course of business of the Obligors and
their Subsidiaries;
(16) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(17) Liens in favor of customs and revenue authorities arising
as a mater of law to secure payment of customer duties in connection with the
importation of goods;
(18) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business that are not delinquent or remain payable without penalty;
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(19) Liens which secure Hedging Obligations that relate to
Indebtedness otherwise permitted under this Agreement;
(20) Liens encumbering property or other assets under
construction in the ordinary course of business arising from progress or partial
payments by a customer of the Company or its Subsidiaries relating to such
property or other assets;
(21) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by the
Company or any of its Subsidiaries in the ordinary course of business;
(22) Liens on an Obligor's interests in satellites and its
terrestrial repeater network, including under the Hughes Satellite Agreement,
subsequent satellite procurement or launch contracts and the Hughes Repeater
Contract;
(23) Liens incurred in the ordinary course of business of the
Obligors and their Subsidiaries with respect to obligations that do not exceed
$10,000,000 (in the aggregate for both Obligors and their Subsidiaries) at any
one time outstanding;
(24) Liens on Qualified Receivables securing Indebtedness
permitted by clause (xii) of the third paragraph of Section 7.7 hereof; and
(25) Liens arising out of financing provided by a satellite or
satellite launch vendor or Affiliate thereof of all or part of the cost of
construction, launch and insurance of one or more replacement satellites or
satellite launches relating to such satellites provided by such vendor or its
Affiliates;
(26) Liens securing Indebtedness permitted under clause (vii) of
Section 7.7, provided that such Liens are no more extensive than the Liens
securing the Indebtedness refunded, refinanced or replaced thereby; and
(27) Liens securing Indebtedness incurred in any Qualified Sale
and Leaseback Transaction.
"Permitted Refinancing Indebtedness" means any Indebtedness of an
Obligor or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of such Obligor or any of its Subsidiaries (other than intercompany
Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus all accrued interest thereon and
the amount of all expenses, consent fees and premiums incurred in connection
therewith);
(2) (A) if such Permitted Refinancing Indebtedness has a
Weighted Average Life to Maturity shorter than that of the Notes or a final
maturity date earlier than the final maturity date of the Notes, such Permitted
Refinancing Indebtedness shall have a Weighted Average Life to Maturity no
shorter than the remaining Weighted Average Life to Maturity of the debt so
extended, refinanced, renewed, replaced, defeased or refunded and a final Stated
Maturity no earlier than the final maturity date of the debt so extended,
refinanced, renewed, replaced, defeased or refunded or (B) in all other cases,
such Permitted Refinancing Indebtedness shall have a final maturity date later
than the final maturity date of, and shall have a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Notes;
(3) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness is subordinated in right of payment to
the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
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(4) such Indebtedness is incurred either by such Obligor or by
the Subsidiary, as applicable, that is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
limited liability company or government or other entity.
"Principals" means General Motors Corporation, DIRECTV
Enterprises, Inc. and Clear Channel Investments, Inc.
"Prior Indenture" means the Indenture, dated as of March 15, 2000,
between the Company and U.S. Trust Company of New York, as Trustee, as amended
or supplemented from time to time.
"Qualified Institutional Buyer" has the meaning set forth in Rule
144A under the Securities Act.
"Qualified Receivables" means the aggregate amount of accounts
receivables of an Obligor determined in accordance with GAAP that are not more
than 90 days past due.
"Qualified Sale and Leaseback Transaction" means a sale and
leaseback transaction (1) involving one or more satellites of an Obligor or any
of its Subsidiaries and (2) the Net Proceeds of which, together with the
aggregate Net Proceeds from all other sale and leaseback transactions involving
satellites consummated after the date hereof (including any subsequent
replacements, amendments or modifications thereof), do not exceed $150,000,000
(in the aggregate for the Obligors and their Subsidiaries).
"Reclassified Securities" has the meaning set forth in Section 9.6
of this Agreement.
"Registration Rights Agreement" means the Second Amended and
Restated Registration Rights Agreement, dated as of the Closing Date, by and
among Holdings and the other parties named on the signature pages thereof, as
such agreement may be amended, modified or supplemented from time to time.
"Related Party" means:
(1) any controlling stockholder, 80% (or more) owned
Subsidiary, or immediate family member (in the case of an individual) of any
Principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding an
80% or more controlling interest of which consist of any one or more Principals
and/or such other Persons referred to in the immediately preceding clause (1).
"Restricted Payment" has the meaning set forth in Section 7.5 of
this Agreement.
"SEC" means the Securities and Exchange Commission.
"Second Amended Distribution Agreement" mean the Second Amended
and Restated Distribution Agreement, to be executed at the Closing, by and among
OnStar, Holdings and the Company, as such agreement may be amended, modified or
supplemented from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreements" means the FCC License Subsidiary Pledge
Agreement and the General Security Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
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"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subordinated Indebtedness" means (i) with respect to the Company,
either (a) unsecured Indebtedness of the Company contractually subordinated in
right of payment to the Notes or (b) Indebtedness of Holdings (and not the
Company) that is structurally subordinated to the Notes and (ii) with respect to
Holdings, unsecured Indebtedness of Holdings that is contractually subordinated
in right of payment to the Notes.
"Subscriber" means a subscriber in good standing to the XM Radio
Service that has paid subscription fees for at least one month of such service
and whose subscription payments are not delinquent.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of
which more than 50% of the total voting power of shares of Voting Stock is at
the time owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership, trust or limited liability company (a) the
sole general partner or the managing general partner, manager or trustee of
which is such Person or a Subsidiary of such Person or (b) the only general
partners or managing members of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantor" means any entity that enters into an
Agreement Guarantee pursuant to Section 11.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Internal Revenue
Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax, fee, levy, duty, tariff,
impost and other charges of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not imposed by any governing
or taxing authority.
"Tax Sharing Agreement" means the tax sharing agreement dated
March 15, 2000 between the Obligors and XM Radio Inc., as in effect on the date
hereof.
"Total Consolidated Indebtedness" means, at any date of
determination, an amount equal to the aggregate amount of all Indebtedness of
Holdings and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP, outstanding as of the date of determination.
"Total Incremental Equity" means, at any date of determination,
the sum of, without duplication: (1) the aggregate cash proceeds received by
Holdings after the Closing from the issuance or sale of Capital Stock of
Holdings (other than Disqualified Stock but including Capital Stock issued upon
the conversion of convertible Pari Passu Indebtedness or from the exercise of
options, warrants or rights to purchase Capital Stock of Holdings other than
Disqualified Stock) to any Person other than a Subsidiary of Holdings; plus (2)
an amount equal to the net reduction in Investments in any Person (other than
Permitted Investments) resulting from the payment in cash of dividends,
repayments of loans or advances or other transfers of assets, in each case to
Holdings or any Subsidiary thereof after the Closing from such Person; provided,
however, that the foregoing sum shall not exceed the amount of Investments
previously made (and treated as a Restricted Payment) by Holdings or any
Subsidiary thereof in such Person and that constitutes a Restricted Payment that
has been deducted from Total Incremental Equity pursuant to clause (3) below;
minus (3) the aggregate amount of all Restricted Payments declared or made on or
after the Closing (including the aggregate amount paid pursuant to clauses (1),
(2), (3), (4), (5) and (7) of the second paragraph of Section 7.5).
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"Trading Day" means any day on which the Class A Common Stock is
traded on the Nasdaq National Market or such other primary national securities
exchange on which the Class A Common Stock is then listed or quoted.
"Transaction Documents" means all documents delivered in
connection with the transactions contemplated by this Agreement, including the
Security Agreements, the Noteholders Agreement, the Director Agreement, the
Intercreditor Agreements, the Registration Rights Agreement, the GM Loan
Agreement, the Second Amended Distribution Agreement and the Agreement Guarantee
of XM Leasing Subsidiary.
"Trustee" means the party named as such in the Indenture until a
successor replaces it in accordance with the applicable provisions of the
Indenture and thereafter means the successor serving thereunder.
"Vesting Date" has the meaning set forth in Section 9.2 of this
Agreement.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of
directors, general partners, managers or trustees of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock at any date, the number of years obtained by
dividing:
(1) the sum of the products obtained by multiplying (a) the
amount of each then remaining installment, sinking fund, serial maturity or
other required payments of principal (or liquidation preference, as applicable),
including payment at final maturity, in respect thereof, by (b) the number of
years (calculated to the nearest one-twelfth) that will elapse between such date
and the making of such payment; by
(2) the then outstanding principal amount (or liquidation
preference) of such Indebtedness (or Disqualified Stock, as applicable).
"Wholly Owned" means, with respect to a Subsidiary of a specified
Person, all of the outstanding Equity Interests of such Subsidiary (other than
directors' qualifying shares) are at the time owned by such Person or by one or
more Wholly Owned Subsidiaries of such Person.
"XM Building Subsidiary" means XM 1500 Eckington LLC, a Delaware
corporation and direct Wholly Owned Subsidiary of Holdings, and any and all
successors thereto.
"XM Capital Subsidiary" means XM Capital Resources Inc., a
Delaware corporation and direct Wholly Owned Subsidiary of the Company, and any
and all successors thereto.
"XM Leasing Subsidiary" means XM Equipment Leasing LLC, a Delaware
limited liability company and direct Wholly Owned Subsidiary of the Company, and
any and all successors thereto.
"XM Radio Assets" means all assets, rights, services and
properties, whether tangible or intangible, used or intended for use in
connection with an XM Radio Business, including satellites, terrestrial
repeating stations, FCC licenses, uplink facilities, musical libraries and other
recorded programming, furniture, fixtures and equipment and telemetry, tracking,
monitoring and control equipment.
"XM Radio Business" means the business of transmitting digital
radio programming throughout the United States by satellite and terrestrial
repeating stations to be received by subscribers, including any business in
which the Company was engaged on the date hereof, and any business reasonably
related thereto.
"XM Radio Service" means digital radio programming transmitted by
satellites and terrestrial repeating stations to vehicle, home and portable
radios in the United States.
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2. PURCHASE AND SALE OF THE NOTES; CLOSING
(a) The Obligors have duly authorized $89,042,387 in aggregate
principal amount of the Series GM Senior Secured Convertible Notes due December
31, 2009, for issuance to the Investor on the terms and subject to the
conditions set forth in this Agreement. The Notes will bear interest at the
Interest Rate and will mature on December 31, 2009, unless earlier prepaid or
Converted in accordance with the terms hereof, and will be in substantially the
form of Exhibit A attached hereto, with such changes thereto, if any, as may be
approved by the Parties.
(b) Each Note shall be governed by, and the rights and the
benefits of the Investor determined in accordance with, the terms and conditions
of this Agreement and the Noteholders Agreement.
(c) The principal amount, together with any premium or accrued
interest thereon, may be Converted at any time, in whole or in part, at the
option of the Holder thereof into Class A Common Stock in accordance with the
provisions of Section 9 of this Agreement. The stock for which any such
principal, premium and interest are Converted in accordance with this Section
2(c) shall be referred to as "Conversion Stock."
(d) The Obligors may at any time after issuance thereof prepay
the principal, together with all interest of the Notes then outstanding in
whole, but not in part, by giving the Holders not less than 20 Business Days
notice of the intention to prepay the Notes. The notice given will specify the
date on which principal of the Notes will be prepaid and state that the Holders
will be entitled at any time up to 5:00 p.m., New York City time, on the fifth
Business Day before the date set for prepayment, to surrender their Notes for
conversion into Class A Common Stock in accordance with the provisions of
Section 9 of this Agreement. If the Obligors give a prepayment notice, and the
Holders do not elect to convert their Notes into Class A Common Stock, the
Obligors will be required to pay all the outstanding principal on the Notes,
together with all accrued but unpaid interest thereon to the date of prepayment,
on the date specified in the prepayment notice.
(e) The Closing shall take place as of 10 A.M., Eastern time,
on the Closing Date, which shall be the next Business Day after the conditions
set forth in Section 13 (other than delivery of items to be delivered at the
Closing and other than satisfaction of those conditions that by their nature are
to be satisfied at the Closing, it being understood that the occurrence of the
Closing shall remain subject to the delivery of such items and the satisfaction
or waiver of such conditions at the Closing) are first satisfied or waived. This
Agreement shall terminate at 5:00 p.m., Eastern standard time, on March 31,
2003, if the Closing has not occurred, unless such date is extended by the
written consent of the Obligors and the Investor. At the Closing, (a) each Party
will deliver executed counterparts of each Transaction Document to which it is a
party; (b) the Obligors shall deliver to the Investor: (i) the Note, together
with an Agreement Guarantee of XM Leasing Subsidiary, (ii) a counterpart of the
Second Amended Distribution Agreement duly executed by the Obligors, and (iii) a
counterpart of the GM Loan Agreement duly executed by the Obligors; and (c) the
Investor shall deliver to the Obligors: (i) a counterpart of the Second Amended
Distribution Agreement duly executed by the Investor and OnStar, (ii) and a
counterpart of the GM Loan Agreement duly executed by the Investor.
(f) By its execution and delivery of this Agreement, the
Investor hereby consents to and approves and, if necessary, will vote any Voting
Stock it may own in favor of, the consummation by the Obligors and their
Subsidiaries of the Concurrent Financing Transactions and all other transactions
contemplated thereby including, without limitation, the Concurrent Financing
Transactions Issuances.
3. INTEREST AND REPAYMENT
With respect to each Note:
3.1. INTEREST ON THE NOTES
Interest will accrue on the Notes and be payable in arrears on
each Interest Payment Date, commencing June 30, 2003. Each payment of principal
or interest on the Notes will be made to the Holder by
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certified or bank cashier's check or wire transfer of immediately available
funds, at such address or to such account as the Holder specifies in writing to
the Obligors at least five Business Days before such payment is to be made,
except that the Obligors may, at their option and subject to the provisions of
the last sentence of this Section 3.1, make any interest payment with shares of
Class A Common Stock having an aggregate Fair Market Value as calculated on the
applicable Interest Payment Date equal to the amount of the interest due. If the
Obligors elect to pay interest in Class A Common Stock, the number of shares to
be issued to the Holder shall be calculated by dividing the amount of interest
due by the Fair Market Value of a share of Class A Common Stock on the
applicable Interest Payment Date, with any fractional shares that may result
treated in the manner set forth in Section 9.4 of this Agreement. The procedures
for the issuance of certificates upon any such payment of interest in Class A
Common Stock shall be governed by Section 9.3 hereof. The ability of the
Obligors to pay interest in Class A Common Stock shall be expressly conditioned
on such issuance not requiring a stockholder approval (which has not been
obtained) under, or otherwise being in violation of, any applicable law or
regulation, or of any requirements of the Nasdaq Stock Market or any domestic
securities exchange or other public trading market upon which the Class A Common
Stock may be listed or quoted.
3.2. INTEREST AFTER MATURITY
In the event the Obligors shall fail to make any payment of the
principal amount of, or interest on, any Note when due, the Obligors shall pay
interest on such unpaid amount, payable from time to time on demand, from the
date such amount shall have become due to the date of payment thereof (after as
well as before judgment), accruing on a daily basis, at a per annum rate of 12%
plus any additional interest pursuant to Section 2.2 of the Registration Rights
Agreement (or such lesser maximum rate that is permitted to be paid under
applicable law).
3.3. PAYMENTS AND COMPUTATIONS
(a) The Obligors will pay all sums becoming due on each Note
for interest, premium or principal, without the presentation or surrender of the
Note or the making of any notation thereon, except that if a Note is paid in
full, following such payment, the Note shall be surrendered to the Obligors at
their principal office for cancellation.
(b) Interest on each Note shall be calculated for the actual
number of days (including the first day but excluding the last day of any
relevant period) elapsed and shall be computed on the basis of a 360-day year of
twelve 30-day months.
(c) If a payment date is not a Business Day at a place of
payment, then (notwithstanding any other provision of this Agreement or the
Notes) payment of interest, premium or principal otherwise due on such date
shall instead be made at that place on the next succeeding Business Day and no
interest shall accrue on such payment for the intervening period.
3.4. PAYMENT AT MATURITY OR UPON CONVERSION
(a) The outstanding principal amount of each Note, together
with any premium and accrued interest thereon, shall be due and payable in full
in cash on the earlier of: (i) the Maturity Date, or (ii) such other date as the
Note becomes due and payable or purchasable pursuant to this Agreement. Payment
of principal of and premium, if any, on the Notes will be made to each Holder by
certified or bank cashier's check or wire transfer of immediately available
funds, at such address and to such account as the Holder shall specify in
writing to the Obligors at least five Business Days before such payment is to be
made.
(b) Upon any Conversion of any Note in accordance with the
terms of Section 9 hereunder, the principal amount of each Note, (or any portion
thereof subject to such Conversion), together with any premium or accrued
interest thereon, shall be Converted into a number of shares of Class A Common
Stock, equal to such principal amount, premium and accrued interest divided by
the Conversion Price, with any fractional shares that may result treated in the
manner set forth in Section 9.4 of this Agreement.
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4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF XM
Each of the Obligors hereby represents and warrants to and agrees
with the Investor as follows as of the date hereof:
4.1. INCORPORATION, STANDING, ETC.
Each of the Obligors and the Material Subsidiaries is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own and operate
its properties, to carry on its business as now conducted and as presently
proposed to be conducted, to enter into this Agreement and the other Transaction
Documents to which each is a party and to perform its obligations hereunder and
thereunder. Each of the Obligors has the corporate power and authority to issue
the Notes and perform its obligations thereunder. Each of the Obligors and XM
Leasing Subsidiary has, by all necessary corporate action, duly authorized the
execution and delivery of this Agreement and the other Transaction Documents to
which each is a party and the performance of its obligations hereunder and
thereunder. Each of the Obligors has, by all necessary corporate action, duly
authorized the execution and delivery of the Notes and the performance of its
obligations thereunder. Each Subsidiary Guarantor has, by all necessary
corporate action, duly authorized the execution and delivery of its Agreement
Guarantee and the performance of its obligations thereunder.
4.2. SUBSIDIARIES
The Company, the FCC License Subsidiary, XM Building Subsidiary,
XM Capital Subsidiary and XM Leasing Subsidiary are the only Material
Subsidiaries. The only assets of the FCC License Subsidiary consist of all of
the FCC licenses used in transmitting the XM Radio Service. The only assets of
the XM Building Subsidiary consist of real property located at 1500 Eckington
Place, NE, Washington, DC and related improvements.
All of the outstanding Capital Stock of the Company and XM
Building Subsidiary are duly authorized, validly issued, fully paid and
non-assessable, and all such Capital Stock is owned beneficially and of record
by Holdings free and clear of any Lien. All of the outstanding Capital Stock of
the FCC License Subsidiary, XM Capital Subsidiary and XM Leasing Subsidiary are
duly authorized, validly issued, fully paid and non-assessable, and all such
Capital Stock is owned beneficially and of record by the Company free and clear
of any Lien, except as contemplated by the FCC License Subsidiary Pledge
Agreement or its predecessor agreement.
4.3. SEC REPORTS
(a) The Obligors have provided to the Investor a draft of their
Offering Circular, dated December 21, 2002, to be used in connection with the
exchange contemplated by clause (3) of the definition of Concurrent Financing
Transactions (the "Offering Circular"), which contains information about the
Obligors' business. Such draft of the Offering Circular does not include any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) The Annual Reports on Form 10-K for the year ended December
31, 2001 filed by the Obligors, and all other reports filed by the Obligors
pursuant to Section 13(a) or 15(d) of the Exchange Act since December 31, 2001
(collectively, the "Exchange Act Filings") through the Closing Date, complied
and will comply (as the case may be) as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations of the SEC
thereunder and such filings, taken as a whole, do not and will not (as the case
may be) include any untrue statement of material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) Holdings is eligible to register Class A Common Stock for
resale by the Holders pursuant to a registration statement on Form S-3 under the
Securities Act.
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4.4. QUALIFICATION
Each of the Obligors and the Material Subsidiaries is duly
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the character of the properties owned or
leased by it therein or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified and in good
standing would not, individually or in the aggregate, result in a Material
Adverse Effect.
4.5. AUTHORIZATION OF AGREEMENT AND NOTES
(a) This Agreement has been duly executed and delivered by each
of the Obligors and constitutes a valid, binding and enforceable obligation of
each of them, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights generally, and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(b) When, on the Closing Date, the Notes and the Security
Agreements have been duly executed and delivered by the Company and the Notes
have been paid for by the Investor in accordance with the terms of this
Agreement, the Notes and the Security Agreements will constitute valid, binding
and enforceable obligations of the Company, subject to applicable bankruptcy,
insolvency, moratorium and similar laws affecting creditors' rights generally,
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law).
(c) When, on the Closing Date, the Notes, the Noteholders
Agreement, the Director Agreement and the Registration Rights Agreement have
been duly executed and delivered by Holdings and the Notes have been paid for by
the Investor in accordance with the terms of this Agreement, the Notes, the
Noteholders Agreement, the Director Agreement and the Registration Rights
Agreement will constitute valid, binding and enforceable obligations of
Holdings, subject to applicable bankruptcy, insolvency, moratorium and similar
laws affecting creditors' rights generally, and subject, as to enforceability,
to general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
(d) When, on the Closing Date, the Agreement Guarantee of XM
Leasing Subsidiary has been duly executed and delivered by XM Leasing Subsidiary
in accordance with the terms of this Agreement, such Agreement Guarantee will
constitute a valid, binding and enforceable obligation of XM Leasing Subsidiary,
subject to applicable bankruptcy, insolvency, moratorium and similar laws
affecting creditors' rights generally, and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
4.6. ABSENCE OF DEFAULTS AND CONFLICTS
Neither of the Obligors nor any of the Material Subsidiaries is in
violation of its respective certificate of incorporation, bylaws or other
charter documents or is in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to which
any of them is a party or by which any of them may be bound, or to which any of
the property or assets of the Obligors or the Material Subsidiaries is subject
(collectively, "Agreements and Instruments"); and the execution, delivery and
performance of this Agreement and the Transaction Documents by the Obligors and
the Material Subsidiaries party thereto in connection with the transactions
contemplated hereby and thereby, and the consummation of the transactions
contemplated herein and therein (including the issuance of the Notes) and
compliance by the Obligors and the Material Subsidiaries with their respective
obligations hereunder and thereunder, do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default (or an event that with notice, lapse of time
or both would become a default) under, require the Obligors to conduct an offer
to repurchase any outstanding Obligations in accordance with the documents
establishing the terms under which such Obligations were incurred, give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
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of either of the Obligors or any of the Material Subsidiaries pursuant to such
Agreements and Instruments, nor will such action result in any violation of the
provisions of the certificate of incorporation, bylaws or other charter
documents of either of the Obligors or any of the Material Subsidiaries or any
applicable law, statute, rule, regulation, judgment, order, writ or decree of
any government, government instrumentality, stock exchange or Nasdaq Stock
Market or court, domestic or foreign, having jurisdiction over either of the
Obligors, any of the Material Subsidiaries or any of the assets or properties of
the Obligors and the Material Subsidiaries.
There are no control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provisions, in each case, which could be violated or
triggered by the ownership level of a stockholder or group, under Holdings'
certificate of incorporation or the laws of the State of Delaware that would be
violated or triggered by the Investor and the Obligors fulfilling their
obligations or exercising their rights under the Notes or the Transaction
Documents, including the Obligors' issuance of the Notes and the Investor's
subsequent Conversion of Notes for Conversion Stock.
4.7. ABSENCE OF PROCEEDINGS
Except as disclosed in Schedule 4.7, there is no action, suit or
proceeding before or by any court or governmental agency or body, domestic or
foreign, now pending, or to the knowledge of the Obligors threatened, against or
affecting the Obligors, the Material Subsidiaries, any of the Officers or
directors of the Obligors or Material Subsidiaries in their capacity as such, or
any of the property or assets of the Obligors or Material Subsidiaries. There
has not been, and to the knowledge of the Obligors there is not pending or
contemplated, any investigation by the SEC involving the Obligors or any current
or former director or officer of an Obligor with respect to such Obligor or any
Subsidiary thereof. The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by an Obligor
under the Exchange Act or the Securities Act.
4.8. POSSESSION OF LICENSES AND PERMITS
Except as disclosed in Schedule 4.8: (i) each of the Obligors and
the Material Subsidiaries possesses such material permits, certificates,
licenses, approvals, consents, orders and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate Federal, state, local or
foreign regulatory agencies or bodies necessary to conduct the business now
operated by it or planned to be conducted by it; (ii) each of the Obligors and
the Material Subsidiaries is in compliance with the terms and conditions of all
of its Governmental Licenses; (iii) all of the Governmental Licenses are valid
and in full force and effect; and (iv) neither of the Obligors nor any of the
Material Subsidiaries has received any notice of, nor do any of them have any
knowledge of any pending or threatened (or any basis therefor), proceedings
relating to the revocation, withdrawal, cancellation, modification, suspension
or non-renewal of any Governmental Licenses.
4.9. NO VIOLATIONS OF LAWS
Neither of the Obligors nor any of the Material Subsidiaries has
violated any law, including (i) the U.S. Communications Act of 1934, as amended,
and the rules or regulations promulgated thereunder, (ii) any applicable state
law or regulation concerning intra-state telecommunications, and (iii) any
foreign law or regulation concerning international communications, in each case
the violation of which, together with any other such violations, would have a
Material Adverse Effect.
4.10. INTERNAL ACCOUNTING CONTROLS
The books, records and accounts of each of the Obligors and the
Material Subsidiaries accurately and fairly reflect, in all material respects,
in reasonable detail, the transactions in and dispositions of the assets of the
respective Obligors and Material Subsidiaries. Each of the Obligors and the
Material Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability;
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(iii) access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded amount for assets is compared
with the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
4.11. TAX RETURNS AND PAYMENTS
The Obligors and the Material Subsidiaries have filed all income
tax returns required by law to be filed by them and have paid all Taxes shown on
such returns and all other Taxes and other governmental charges levied upon them
and their respective properties, assets, income and franchises, to the extent
such Taxes have become due and payable and before they have become delinquent,
except for any Taxes the amount, applicability or validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which the Obligors or the Material Subsidiaries, as the case may be, have
established adequate reserves in accordance with GAAP. The charges, accruals and
reserves on the books of the Obligors and the Material Subsidiaries in respect
of Taxes for all fiscal periods are adequate in the reasonable opinion of the
Obligors and, to the knowledge of the Obligors, there are no additional
assessments for such periods or any basis therefore.
4.12. INDEBTEDNESS
Neither of the Obligors nor any of the Material Subsidiaries is in
default, and no waiver of default is currently in effect, in the payment of any
interest or principal on any Indebtedness in aggregate principal amount in
excess of $5,000,000.
4.13. TITLE TO PROPERTIES; LIENS
Each of the Obligors and the Material Subsidiaries has good and
marketable title to all of its properties and assets, free and clear of all
Liens, except for Permitted Liens.
4.14. PATENTS, TRADEMARKS, AUTHORIZATIONS, ETC.
Except as disclosed in Schedule 4.14, each of the Obligors and the
Material Subsidiaries owns, possesses or has the right to use (without any known
conflict with the rights of others) all patents, trademarks, service marks,
trade names, copyrights, licenses and authorizations which are necessary to the
conduct of its business as currently conducted.
4.15. GOVERNMENTAL CONSENTS
Except as may be required to be obtained or made under the
Securities Act and applicable state securities laws in connection with the
exercise of any registration rights of a Holder provided for in the Registration
Rights Agreement or any registration rights granted to purchasers in the
offering(s) contemplated by clause (6) of the definition of Concurrent Financing
Transactions, neither of the Obligors nor any of the Material Subsidiaries is
required to procure, make or file any consent, approval or authorization of, or
any notice to, of filing, registration or qualification with, any court or
administrative or governmental body in order to execute and deliver this
Agreement and the Notes and to perform its obligations hereunder and under any
and all Transaction Documents.
4.16. RESTRICTIONS
Except for the restrictions contained herein or under applicable
law, there will be no restrictions upon the Notes (including any restrictions
set forth in any existing shareholder agreement), with the exception of any
restrictions contained in the Noteholders Agreement, the Director Agreement and
the Registration Rights Agreement.
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4.17. CAPITALIZATION
The authorized, issued and outstanding Capital Stock of Holdings
is as set forth in Schedule 4.17 hereof under "Capitalization." All of the
outstanding shares of Capital Stock of Holdings are duly authorized, validly
issued, fully paid and non-assessable. Except as disclosed on Schedule 4.17,
neither of the Obligors nor any of the Material Subsidiaries has outstanding any
securities convertible into or exchangeable for any of its Capital Stock nor
does it have outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, any of its Capital Stock or securities convertible into
or exchangeable for any of its Capital Stock. Subject to the provisions of
Section 9.7, all shares of Conversion Stock will, when issued in accordance with
the terms of this Agreement and the Notes, be duly and validly issued, fully
paid and non-assessable and free from all Liens (other than any Liens created by
Holders).
4.18. SENIORITY OF NOTES
The Notes shall rank equal to all Indebtedness incurred by the
Obligors pursuant to the Concurrent Financing Transactions and all Indebtedness
of the Company under the Prior Indenture. Except as disclosed on Schedule 4.18,
the Notes shall rank senior to all other existing Indebtedness of the Obligors
as of the date of issuance of the Notes.
4.19. MATERIAL EVENTS
Except as disclosed in the Exchange Act Filings and the Offering
Circular, since September 30, 2002, there has not been with respect to Holdings
or any of its Material Subsidiaries:
(a) any event which could reasonably be expected to result in a
Material Adverse Effect; or
(b) any damages, destruction or loss to the properties or
assets of either of the Obligors or any of the Material Subsidiaries, whether or
not covered by insurance, that has or could reasonably be expected to have a
Material Adverse Effect or that in the aggregate exceeds $100,000; or
(c) any loss or waiver by either of the Obligors or any of the
Material Subsidiaries of any right, not in the ordinary course of business, or
any material debt owed to any of them; or
(d) other than the sales of assets in the ordinary course of
business (including pursuant to sale leaseback transactions), any sale, transfer
or other disposition of, or agreements to sell, transfer or otherwise dispose
of, any assets by either of the Obligors or any of the Material Subsidiaries in
excess of $100,000 in the aggregate, or any cancellation or agreement to cancel
any debt or claims of either of the Obligors or any of the Material
Subsidiaries; or
(e) any declaration or setting aside or payment of any dividend
(whether in cash, property or stock) or any distribution (whether in cash,
property or stock) or other payment with respect to any of the Capital Stock of
either of the Obligors or any of the Material Subsidiaries, or any repurchase,
purchase or other acquisition of, or agreement to repurchase, purchase or
otherwise acquire, any Capital Stock of either of the Obligors or any of the
Material Subsidiaries; or
(f) any amendment or termination of any contract, agreement or
license to which either of the Obligors or any of the Material Subsidiaries is a
party or by which it is bound, except where such amendment or termination could
not be reasonably expected to have a Material Adverse Effect; or
(g) any resignation or termination or employment of any key
employee, and there is no impending or threatened resignation or termination or
terminations of employment of any key employee; or
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(h) any labor dispute (including any negotiation, or request
for negotiation, for any labor representation or any labor contract) affecting
either of the Obligors or any of the Material Subsidiaries; or
(i) any application of any existing (or the enactment of any
new) environmental law or personnel, product safety law or other governmental
regulation that has or which could reasonably be expected to have a Material
Adverse Effect.
4.20. FINANCIAL STATEMENTS
The financial statements and schedules of Holdings and its
consolidated subsidiaries included in the Exchange Act Filings comply as to form
in all material respects with applicable accounting requirements and present
fairly in all material respects the consolidated financial condition of Holdings
and its consolidated Subsidiaries as of the respective dates thereof and the
consolidated results of operations and cash flows of Holdings and its
consolidated Subsidiaries for the respective periods covered thereby, all in
conformity with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto and subject, in the
case of unaudited statements, to normal year-end audit adjustments).
The financial statements and schedules of the Company and its
consolidated subsidiaries included in the Exchange Act Filings comply as to form
in all material respects with applicable accounting requirements and present
fairly in all material respects the consolidated financial condition of the
Company and its consolidated Subsidiaries as of the respective dates thereof and
the consolidated results of operations and cash flows of the Company and its
consolidated Subsidiaries for the respective periods covered thereby, all in
conformity with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto and subject, in the
case of unaudited statements, to normal year-end audit adjustments).
4.21. NO UNDISCLOSED FEES
Except as disclosed on Schedule 4.21, there are no fees or
payments to be made by either Obligor to bankers, brokers or agents with regard
to the issue and delivery of the Notes or the transactions contemplated by the
Concurrent Financing Transactions.
4.22. NO TRANSACTIONS WITH AFFILIATES
Neither of the Obligors nor any of the Material Subsidiaries is
presently party to any material transaction with an Affiliate thereof on terms
any less favorable to such Obligor or Material Subsidiary than would have been
obtainable in arm's length dealing with a Person not an Affiliate.
4.23. REGISTRATION RIGHTS
Except as disclosed on Schedule 4.23, there are no contracts,
agreements or understandings between Holdings and any other Person granting such
Person the right to require Holdings to file a registration statement under the
Securities Act with respect to any securities that Holdings owned or to be owned
by such a Person or to require Holdings to include such securities in the
securities registered pursuant to any of the registration statements filed by
Holdings under the Securities Act.
4.24. PRIVATE PLACEMENT
Neither of the Obligors nor any Person acting on such Obligor's
behalf has sold or offered to sell or solicited any offer to buy the Notes by
means of any form of general solicitation or advertising. Neither of the
Obligors nor any of its Affiliates nor any Person acting on such Obligor's
behalf has, directly or indirectly, at any time within the past six months, made
any offer or sale of any security or solicitation of any offer to buy any
security under circumstances that would (i) eliminate the availability of an
exemption from registration under the Securities Act in connection with the
offer and sale of the Notes as contemplated hereby or (ii) cause the offering of
the Notes
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pursuant to this Agreement to be integrated with other securities
offerings by such Obligor (including any such offering contemplated by the
Concurrent Financing Transactions) for purposes of any applicable law,
regulation or shareholder approval provisions, including under the rules and
regulations of the Nasdaq Stock Market.
4.25. ACKNOWLEDGEMENT REGARDING INVESTOR'S PURCHASE OF THE NOTE
The Obligors acknowledge and agree that the Investor is acting
solely in the capacity of an arm's-length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Obligors further
acknowledge that the Investor is not acting as a financial advisor or fiduciary
of the Obligors (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by the Investor or any
of its representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Investor's purchase
of the Notes. Each Obligor further represents to the Investor that its decision
to enter into this Agreement has been based solely on its independent evaluation
and the independent evaluation of its representatives.
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to and agrees with each
Obligor that as of the date hereof:
5.1. RISKS OF INVESTMENT
Its management recognizes that the purchase of a Note and any
securities which may be issued in payment of interest on or upon the Conversion
thereof (collectively, the "Securities") involves a high degree of risk
including the following: (i) an investment in the Obligors is highly
speculative, and only investors who can afford the loss of their entire
investment should consider investing in the Obligors and purchasing the
Securities; (ii) the Investor may not be able to liquidate its investment; (iii)
transferability of the Securities is restricted; (iv) in the event of a
disposition of the Securities, the Investor could sustain the loss of its entire
investment and (v) the Obligors do not anticipate the payment of dividends in
the foreseeable future.
5.2. INVESTMENT EXPERIENCE
Its management has prior investment experience, including
investment in securities which are traded on the Nasdaq National Market. To the
extent it has deemed appropriate, the Investor has retained and relied upon
professional advice regarding the investment, tax and legal merits and
consequences of this Agreement and its purchase of Notes hereunder.
5.3. ABILITY TO BEAR RISK
By reason of its management's business or financial experience the
Investor has the capacity to protect its own interests in connection with the
transaction contemplated hereby, and is able to bear the economic risk which it
hereby assumes.
5.4. RECEIPT AND REVIEW OF DOCUMENTATION
Its management has been furnished by the Obligors during the
course of this transaction with information regarding the Obligors which such
Investor's management has requested, has been afforded the opportunity to ask
questions of and receive answers from duly authorized officers or other
representatives of the Obligors concerning the terms and conditions of the
Securities, and has received any additional information which it's management
has requested.
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5.5. ACQUISITION FOR OWN ACCOUNT.
The Investor is acquiring the Securities for its own account for
investment only, and not with a view towards their distribution in violation of
applicable securities laws.
5.6. NO PUBLIC MARKET; RULE 144
(a) Its management understands that there currently is no
public market for the Notes. Its management understands and hereby acknowledges
that the Obligors are under no obligation to register the Notes under the
Securities Act or any state securities or "blue sky" laws.
(b) The Investor's management acknowledges and agrees that the
shares of Class A Common Stock the Investor may receive upon Conversion of Notes
must be held indefinitely unless such shares are subsequently registered under
the Securities Act or an exemption from such registration is available. The
Investor has been advised or is aware of the provisions of Rule 144 promulgated
under the Securities Act, which permits limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things: the availability of certain current public information about
Holdings, the resale occurring not less than one year after a party has
purchased and paid for the security to be sold, the sale being through an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Exchange Act) and the number of shares
being sold during any three-month period not exceeding specified limitations.
5.7. ORGANIZATION, GOOD STANDING, CORPORATE AUTHORITY
It is duly organized and validly existing as a corporation and in
good standing under the laws of the State of Delaware, with requisite power and
authority (corporate and other) to own its properties and conduct its business.
5.8. DUE AUTHORIZATION
The execution and delivery of, and the performance by the Investor
of its obligations under, this Agreement and the other Transaction Documents to
which it is a party have been duly and validly authorized and, upon execution
and delivery thereof, this Agreement and the other Transaction Documents to
which it is a party will constitute the legal, valid, binding obligations of
such Investor, enforceable against such Investor in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights generally, and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
5.9. QUALIFIED INSTITUTIONAL BUYER, ACCREDITED INVESTOR
It is:
(a) a Qualified Institutional Buyer and an institutional
Accredited Investor, and
(b) aware that the sale of Securities to it is being made in
reliance on the exemption from the registration requirements provided by Section
4(2) of the Securities Act and the regulations promulgated thereunder.
5.10. ACKNOWLEDGEMENT REGARDING INVESTOR'S PURCHASE OF NOTES
It acknowledges that it is not relying upon any person, firm or
corporation (other than the Obligors) in making its investment or decision to
invest in the Notes.
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6. RESTRICTIONS ON TRANSFER
(a) The Investor agrees, and each subsequent Holder of the
Securities by its acceptance thereof will agree (to the extent bound by the
terms of the Noteholders Agreement), to offer, sell or otherwise transfer such
Securities only in compliance with the terms and conditions set forth in the
Noteholders Agreement. The Investor acknowledges that each certificate
representing Securities will contain a legend substantially to the following
effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THESE
SECURITIES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
RE-OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION
UNDER THE SECURITIES ACT.
Certificates evidencing Securities shall not be required to contain such legend
(i) following any sale of such Securities pursuant to an effective registration
statement covering t |
