Term Loan Agreement [Amendment No. 3] - Sirius Satellite Radio Inc. and Lehman Commercial Paper Inc.
THIRD AMENDMENT
THIRD AMENDMENT, dated as of March 26, 2002 (this
"Amendment"), to the Term Loan Agreement, dated as of June 1, 2000 (as amended,
supplemented or otherwise modified from time to time, the "Term Loan
Agreement"), among SIRIUS SATELLITE RADIO INC., a Delaware corporation (the
"Borrower"), the several banks and other financial institutions or entities from
time to time parties to the Term Loan Agreement (the "Lenders"), LEHMAN BROTHERS
INC., as advisor, lead arranger and book manager, LEHMAN COMMERCIAL PAPER INC.,
as syndication agent, and LEHMAN COMMERCIAL PAPER INC., as administrative agent
(in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lenders amend,
and the Lenders have agreed to amend, certain of the provisions of the Term Loan
Agreement, upon the terms and subject to the conditions set forth below;
NOW, THEREFORE, in consideration of the promises and mutual
agreements contained herein, and for other valuable consideration the receipt of
which is hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Definitions. Unless otherwise defined herein, terms
defined in the Term Loan Agreement and used herein shall have the meanings given
to them in the Term Loan Agreement.
Section 2. Amendments to Section 1.1 (Defined Terms).
(a) Section 1.1 of the Term Loan Agreement is hereby amended
by deleting therefrom the definitions of "Adjusted Pre-Sac Cash Flow", "Pre-Sac
Cash Flow", "Subscriber Acquisition Cost Per Subscriber", "Subscriber
Acquisition Costs" and "Subscribers" in their respective entireties and
substituting in lieu thereof the following definitions in the appropriate
alphabetical order:
"Adjusted Pre-SAC Cash Flow": for any period, (a) Pre-SAC Cash
Flow for such period less (b) the product of (i) the number of
Subscribers that canceled their subscriptions or failed to renew their
existing subscriptions during such period multiplied by (ii) the
Adjusted Subscriber Acquisition Cost Per Subscriber for such period.
"Pre-SAC Cash Flow": for any period, the sum of (a)
Consolidated EBITDA for such period plus, without duplication and to
the extent deducted in determining Consolidated EBITDA, (b) Subscriber
Acquisition Costs for such period.
"Subscriber Acquisition Costs": for any period, the aggregate
costs incurred by the Borrower and its Subsidiaries for the generation
of Subscribers during such period consisting of sales commissions,
rebates on equipment (including chipsets), and equipment subsidies,
determined on a consolidated basis in accordance with GAAP. For
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the avoidance of doubt, it is understood and agreed that "Subscriber
Acquisition Costs" shall exclude the aggregate amount of marketing and
selling expenses (including, without limitation, advertising and
promotional expenses, revenue sharing and residual payments and
expenses) incurred by the Borrower and its Subsidiaries for the
generation of Subscribers during such period.
"Subscribers": subscribers for the satellite radio services
provided by the Borrower and its Subsidiaries (a) from whom the
Borrower or its Subsidiaries, or any agent or designee of the Borrower
or its Subsidiaries, has received at least one payment for radio
service (including, for purposes of this definition, payments for radio
service received from automotive manufacturers or dealers) or with
respect to whom the Borrower has recognized revenue in accordance with
GAAP in respect of a commitment to subscribe for radio service, (b)
whose account balance is not more than 60 days past due, measured from
the invoice due date thereof, without giving effect to any extensions
thereof, and (c) who have not canceled their subscription or failed to
renew their existing subscription.
(b) Section 1.1 of the Term Loan Agreement is hereby further
amended by adding thereto the following definitions in the appropriate
alphabetical order:
"Adjusted Subscriber Acquisition Cost Per Subscriber": for any
period, a fraction the numerator of which is the Adjusted Subscriber
Acquisition Costs for such period and the denominator of which is the
gross number of Subscribers added during such period.
"Adjusted Subscriber Acquisition Costs": for any period, the
Subscriber Acquisition Costs for such period plus or minus, as
applicable, such amount as is necessary to reflect any timing
differences between the period in which such Subscriber Acquisition
Costs were incurred and the period in which the Subscribers were
generated, with such adjustments to be made on a quarterly basis by
the Borrower's chief financial officer and subject to the
Administrative Agent's reasonable satisfaction with such adjustments.
"Subscriber Revenue": for any period, the consolidated gross
revenues of the Borrower received during such period from Subscribers
in respect of their subscriptions for satellite radio service (other
than any such gross revenues arising from subscriber activation fees),
determined on a consolidated basis in accordance with GAAP.
Section 3. Amendment to Section 2.4 (Repayment of Loans).
Section 2.4 of the Term Loan Agreement is hereby amended in its entirety to read
as follows:
2.4 Repayment of Loans. The Loans of each Lender shall mature
in consecutive quarterly installments, commencing on June 30, 2002,
each of which shall be in an amount equal to such Lender's Loan
Percentage multiplied by the amount set forth below opposite such
installment:
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<TABLE>
<CAPTION>
Installment Principal Amount
----------- -----------------
<S> <C>
June 30, 2002 $7,500,000
September 30, 2002 7,500,000
December 31, 2002 7,500,000
March 31, 2003 7,500,000
June 30, 2003 11,500,000
September 30, 2003 0
December 31, 2003 0
March 31, 2004 3,375,000
June 30, 2004 3,375,000
September 30, 2004 3,375,000
December 31, 2004 3,375,000
March 31, 2005 23,750,000
June 30, 2005 23,750,000
September 30, 2005 23,750,000
Maturity Date 23,750,000;
</TABLE>
provided that the failure of the Borrower to pay any of the foregoing
quarterly installments due through and including June 30, 2003 shall
not constitute an Event of Default unless such failure shall have
continued for 90 days after such payment is scheduled to be made.
Section 4. Amendment to Section 5.1(a) (Financial Statements).
Section 5.1(a) of the Term Loan Agreement is hereby amended by deleting
therefrom the dates "December 31, 2000 and December 31, 2001" and substituting
in lieu thereof the dates "December 31, 2001, December 31, 2002 and December 31,
2003".
Section 5. Amendment to Section 6.1 (Financial Condition
Covenants). Paragraphs (a), (b) and (c) of Section 6.1 of the Term Loan
Agreement are hereby amended in their respective entireties to read as follows:
(a) Minimum Subscriber Revenue. Permit the amount of
Subscriber Revenue, for any quarterly period ending with any fiscal
quarter set forth below, to be less than the number set forth below
opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Subscriber Revenue
-------------- ------------------
<S> <C>
FQ1 2003 $ 2,300,000
FQ2 2003 4,400,000
FQ3 2003 7,500,000
FQ4 2003 10,400,000
FQ1 2004 15,000,000
FQ2 2004 21,600,000
FQ3 2004 29,100,000
</TABLE>
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<TABLE>
<CAPTION>
Fiscal Quarter Subscriber Revenue
-------------- ------------------
<S> <C>
FQ4 2004 36,600,000
FQ1 2005 44,700,000
FQ2 2005 54,500,000
FQ3 2005 64,800,000
</TABLE>
(b) Minimum Pre-SAC Cash Flow. Permit Pre-SAC Cash Flow, for any quarterly
period ending with any fiscal quarter set forth below, to be less than
the amount set forth below opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Pre-SAC Cash Flow
-------------- -----------------
<S> <C>
FQ1 2003 $(65,000,000)
FQ2 2003 (62,000,000)
FQ3 2003 (57,500,000)
FQ4 2003 (57,500,000)
FQ1 2004 (50,000,000)
FQ2 2004 (45,000,000)
FQ3 2004 (41,000,000)
FQ4 2004 (34,000,000)
FQ1 2005 (28,000,000)
FQ2 2005 (20,000,000)
FQ3 2005 (14,000,000);
</TABLE>
provided that failure to satisfy the minimum Pre-SAC Cash Flow levels
for any of the foregoing fiscal quarters of the Borrower shall not
constitute an Event of Default if the Pre-Sac Cash Flow for the next
consecutive fiscal quarter is at least equal to the sum of the amount
set forth above opposite such fiscal quarter plus the amount of the
deficiency in the immediately preceding fiscal quarter (it being
understood and agreed that, (i) during the period commencing with the
first day of the quarterly period for which the Borrower failed to
satisfy the minimum Pre-Sac Cash Flow level and ending on the earlier
of (A) the date of delivery to the Administrative Agent of the
financial statements for the next succeeding fiscal quarter of the
Borrower and (B) the date on which the financial statements for the
next succeeding fiscal quarter of the Borrower are required to be
delivered to the Administrative Agent pursuant to Section 5.1, the
Lenders shall be deemed to have waived any Event of Default arising
under Section 7(c)(i) from such failure and (ii) the provisions of
this proviso shall not apply in the event of a failure by the Borrower
to satisfy the minimum Pre-SAC Cash Flow level for the fiscal quarter
immediately succeeding the fiscal quarter in which there was such a
failure and, accordingly, the Borrower shall not be entitled to any
waiver of the related Event of Default for two or more consecutive
fiscal quarters of the Borrower).
(c) Minimum Adjusted Pre-SAC Cash Flow. Permit Adjusted
Pre-SAC Cash Flow, for any quarterly period ending with any fiscal
quarter set forth below, to be less than the amount set forth below
opposite such fiscal quarter:
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<TABLE>
<CAPTION>
Fiscal Quarter Adjusted Pre-SAC Cash Flow
-------------- --------------------------
<S> <C>
FQ3 2003 $(58,400,000)
FQ4 2003 (58,500,000)
FQ1 2004 (51,500,000)
FQ2 2004 (46,900,000)
FQ3 2004 (42,900,000)
FQ4 2004 (35,900,000)
FQ1 2005 (30,300,000)
FQ2 2005 (22,700,000)
FQ3 2005 (16,700,000);
</TABLE>
provided that (i) failure to satisfy the minimum Adjusted Pre-SAC Cash
Flow levels with respect to the third or fourth fiscal quarter of the
Borrower's fiscal year 2003 shall not constitute an Event of Default
but, at all times during the continuance of such failure, the
Applicable Margins for the Loans shall be increased by 50 basis points
and (ii) failure to satisfy the minimum Adjusted Pre-SAC Cash Flow
levels for any of the foregoing fiscal quarters of the Borrower (other
than the third and fourth fiscal quarters of the Borrower's fiscal
year 2003) shall not constitute an Event of Default if the Adjusted
Pre-Sac Cash Flow for the next consecutive fiscal quarter is at least
equal to the sum of the amount set forth above opposite such fiscal
quarter plus the amount of the deficiency in the immediately preceding
fiscal quarter (it being understood and agreed that, (A) during the
period commencing with the first day of the quarterly period for which
the Borrower failed to satisfy the minimum Adjusted Pre-Sac Cash Flow
level and ending on the earlier of (x) the date of delivery to the
Administrative Agent of the financial statements for the next
succeeding fiscal quarter of the Borrower and (y) the date on which
the financial statements for the next succeeding fiscal quarter of the
Borrower are required to be delivered to the Administrative Agent
pursuant to Section 5.1, the Lenders shall be deemed to have waived
any Event of Default arising under Section 7(c)(i) from such failure
and (B) the provisions of this clause (ii) shall not apply in the
event of a failure by the Borrower to satisfy the minimum Adjusted
Pre-SAC Cash Flow level for the fiscal quarter immediately succeeding
the fiscal quarter in which there was such a failure and, accordingly,
the Borrower shall not be entitled to any waiver of the related Event
of Default for two or more consecutive fiscal quarters of the
Borrower).
Section 6. Amendment to Section 6.2(c) (Limitation on
Indebtedness). Section 6.2(c) of the Term Loan Agreement is hereby amended by
deleting therefrom the number "$500,000" and substituting in lieu thereof the
number "$25,000,000".
Section 7. Amendment to Section 6.8(a) (Limitation on Optional
Payments and Modifications of Debt Instruments, etc.). Section 6.8(a) of the
Term Loan Agreement is hereby amended by (a) deleting the "and" at the end of
clause (i) thereof and (b) deleting clause (ii) thereof in its entirety and
substituting in lieu thereof the following:
(ii) so long as no Default or Event of Default is continuing or would
result therefrom, any exchange, prepayment, redemption, repurchase or
other acquisition of the Senior Discount Notes, the Senior Notes
and/or any Indebtedness outstanding under the Deferral
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Credit Agreement (as such agreement is in effect on March 26, 2002)
between the Borrower and Space Systems/Loral, Inc. made with (1) cash,
(2) the proceeds of the issuance by the Borrower of its Capital Stock
(other than Disqualified Stock) or in exchange for its Capital Stock
(other than Disqualified Stock), (3) Refinancing Indebtedness that
satisfies the requirements of clause (i) above, (4) Subordinated Debt
of the Borrower, which may or may not be convertible into the
Borrower's common stock or (5) any combination of the consideration
described in clauses (1) through (4) above and (iii) so long as no
Default or Event of Default is continuing or would result therefrom,
any exchange, prepayment, redemption, repurchase or other acquisition
of the Borrower's 8-3/4% Convertible Subordinated Notes due 2009 that
are outstanding on March 26, 2002 made with the proceeds of the
issuance after March 26, 2002 by the Borrower of its Capital Stock
(other than Disqualified Stock) or in exchange for its Capital Stock
(other than Disqualified Stock); provided that no exchange,
prepayment, redemption, repurchase or other acquisition of such
Indebtedness shall be permitted by the foregoing clause (ii) or (iii)
at any time the Borrower has not made all principal payments then
required by Section 2.4, without giving effect to the proviso thereto.
Section 8. Waiver. The Lenders hereby waive any Events of
Default arising under Section 7(c)(i) of the Term Loan Agreement as a result of
any exchange of Senior Discount Notes and Senior Notes made by the Borrower
prior to the date hereof for the issuance by the Borrower of shares of its
common stock in violation of Section 6.8 of the Term Loan Agreement.
Section 9. Representations; No Default. On and as of the date
hereof, and after giving effect to this Amendment, the Borrower (a) certifies
that no Default or Event of Default has occurred or is continuing, and (b)
confirms, reaffirms and restates that the representations and warranties set
forth in Section 3 of the Term Loan Agreement are true and correct in all
material respects, except for such representations and warranties expressly
stated to relate to a specific earlier date, in which case such representations
and warranties were true and correct in all material respects as of such earlier
date.
Section 10. Conditions to Effectiveness. This Amendment shall
become effective on and as of the date (the "Amendment Effective Date") of
satisfaction of the following conditions precedent:
(a) The Administrative Agent shall have received (i) an
executed counterpart of this Amendment, duly executed and delivered by
a duly authorized officer of the Borrower, (ii) executed Lender
Consent Letters (or facsimile transmissions thereof), substantially in
the form of Exhibit A hereto ("Lender Consent Letters"), from the
Required Lenders, (iii) an executed certificate of an officer of the
Borrower in form reasonably satisfactory to the Administrative Agent
as to the matters set forth in Section 9 of this Amendment and as to
such other customary matters as the Administrative Agent may
reasonably request and (iv) the legal opinions of general counsel to
the Borrower and of Paul, Weiss, Rifkind, Wharton & Garrison, as
special counsel to the Borrower, in form and substance satisfactory to
the Administrative Agent and covering such matters as the
Administrative Agent shall reasonably require.
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(b) The Borrower and the Administrative Agent shall have duly
executed and delivered a letter agreement, in form and substance
satisfactory to the Administrative Agent, as to amendments to (i) the
Amended and Restated Warrant Agreement, dated as of December 27, 2000
(the "Warrant Agreement"), between the Borrower and United States
Trust Company of New York, as warrant agent and escrow agent, and (ii)
the warrants issued under the Warrant Agreement (the "Warrants"), in
each case pursuant to which (A) the exercise price of the Warrants
shall be decreased to $15.00 per share, subject to adjustments to such
price as provided in the Warrant Agreement, and (B) the Borrower shall
agree to post-effectively amend the registration statement relating to
the Warrants to reflect such decrease in the exercise price and to
cover such other matters as the Administrative Agent shall reasonably
require.
Section 11. Reference to and Effect on the Loan Documents. On
and after the Amendment Effective Date, each reference in the Term Loan
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Term Loan Agreement, and each reference in the other Loan
Documents to "the Term Loan Agreement", "thereunder", "thereof" or words of like
import referring to the Term Loan Agreement, shall mean and be a reference to
the Term Loan Agreement as amended hereby. Except as expressly amended herein,
the Term Loan Agreement shall continue to be, and shall remain, in full force
and effect in accordance with the terms thereof and is hereby in all respects
ratified and confirmed. This Amendment shall not, except as expressly provided
herein, be deemed to be a waiver of, or consent to, or a modification or
amendment of, any other term or condition of the Term Loan Agreement or any
other Loan Document or to prejudice any other right or rights which the Agents
or the Lenders may now have or may have in the future under or in connection
with the Term Loan Agreement or any of the instruments or agreements referred to
therein, as the same may be amended from time to time.
Section 12. Payment of Expenses. The Borrower agrees to pay or
reimburse the Administrative Agent for the reasonable fees and disbursements of
its counsel.
Section 13. Counterparts. This Amendment may be executed by
the parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed signature page of this Amendment by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. A set of the copies of this Amendment signed by the parties
hereto shall be lodged with the Borrower and the Administrative Agent.
Section 14. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their respective duly authorized
officers as of the date first above written.
SIRIUS SATELLITE RADIO INC.
By: /s/ John J. Scelfo
---------------------------------------
John J. Scelfo
Executive Vice President and
Chief Financial Officer
LEHMAN COMMERCIAL PAPER INC.,
as Syndication Agent and as
Administrative Agent
By: /s/ James P. Seery, Jr.
---------------------------------------
Authorized Signatory
<PAGE>
EXHIBIT A
LENDER CONSENT LETTER
SIRIUS SATELLITE RADIO INC.
TERM LOAN AGREEMENT
DATED AS OF JUNE 1, 2000
To: Lehman Commercial Paper Inc.,
as Syndication Agent and
as Administrative Agent
745 Seventh Avenue
New York, New York 10019
Ladies and Gentlemen:
Reference is made to the Term Loan Agreement, dated as of June
1, 2000 (as amended, supplemented or otherwise modified from time to time, the
"Term Loan Agreement"), among Sirius Satellite Radio Inc., a Delaware
corporation (the "Borrower"), the Lenders parties thereto, Lehman Brothers Inc.,
as Arranger, and Lehman Commercial Paper Inc., as Syndication Agent and as
Administrative Agent. Unless otherwise defined herein, capitalized terms used
herein and defined in the Term Loan Agreement are used herein as therein
defined.
The Borrower has requested that the Lenders consent to amend
the Term Loan Agreement on the terms described in the Amendment to which a form
of this Lender Consent Letter is attached as Exhibit A (the "Amendment").
Pursuant to Section 9.1 of the Term Loan Agreement, the
undersigned Lender hereby (i) represents that, as of the date of this Lender
Consent, it is the only Lender party to the Term Loan Agreement and (ii)
consents to the execution by the Agents of the Amendment.
Very truly yours,
LEHMAN COMMERCIAL PAPER INC.
By: /s/ James P. Seery, Jr.
--------------------------------------
Name: James P. Seery, Jr.
Title: Authorized Signatory
Dated as of March 26, 2002