Note Purchase Agreement - XM Satellite Radio Holdings Inc., XM Satellite Radio Inc., Columbia Capital, AEA XM Investors, Hughes Electronics Corp., Black Bear Funds, George Haywood, BayStar Capital Management LLC, Royal Bank of Canada, Superius Securities Group Inc. Money Purchase Plan, SF Capital Partners Ltd., American Honda Motor Co. Inc., Michael W. Harris, Paul Greenwald, Avdan Partners, LP, Hearst Communications Inc., John Dealy, A.R. Sanchez, Jr., Neera Singh and Rajendra Singh JTWROS, Hersh Raj Singh Educational Trust and Samir Raj Singh Educational Trust
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XM SATELLITE RADIO HOLDINGS INC.
XM SATELLITE RADIO INC.
Up to $366,300,000 Principal Amount at Maturity of
10% Senior Secured Discount Convertible Notes due 2009
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NOTE PURCHASE AGREEMENT
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Dated as of December 21, 2002
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TABLE OF CONTENTS
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1. DEFINITIONS............................................................................ 1
2. PURCHASE AND SALE OF THE NOTES; CLOSING................................................ 19
3. INTEREST AND REPAYMENT................................................................. 20
3.1. Interest on the Notes............................................................ 20
3.2. Interest after Maturity.......................................................... 20
3.3. Payments and Computations........................................................ 20
3.4. Payment at Maturity or Upon Conversion........................................... 21
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF XM....................................... 21
4.1. Incorporation, Standing, etc..................................................... 21
4.2. Subsidiaries..................................................................... 21
4.3. SEC Reports...................................................................... 22
4.4. Qualification.................................................................... 22
4.5. Authorization of Agreement and Notes............................................. 22
4.6. Absence of Defaults and Conflicts................................................ 23
4.7. Absence of Proceedings........................................................... 23
4.8. Possession of Licenses and Permits............................................... 24
4.9. No Violations of Laws............................................................ 24
4.10. Internal Accounting Controls..................................................... 24
4.11. Tax Returns and Payments......................................................... 24
4.12. Indebtedness..................................................................... 24
4.13. Title to Properties; Liens....................................................... 25
4.14. Patents, Trademarks, Authorizations, etc......................................... 25
4.15. Governmental Consents............................................................ 25
4.16. Restrictions..................................................................... 25
4.17. Capitalization................................................................... 25
4.18. Seniority of Notes............................................................... 25
4.19. Material Events.................................................................. 26
4.20. Financial Statements............................................................. 26
4.21. No Undisclosed Fees.............................................................. 27
4.22. No Transactions with Affiliates.................................................. 27
4.23. Registration Rights.............................................................. 27
4.24. Private Placement................................................................ 27
4.25. Acknowledgement Regarding Investors' Purchases of Notes.......................... 27
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS........................................ 27
5.1. Risks of Investment.............................................................. 28
5.2. Investment Experience............................................................ 28
5.3. Ability to Bear Risk............................................................. 28
5.4. Receipt and Review of Documentation.............................................. 28
5.5. Acquisition for Own Account...................................................... 28
5.6. No Public Market; Rule 144....................................................... 28
5.7. Organization, Good Standing, Corporate Authority................................. 29
5.8. Due Authorization................................................................ 29
5.9. Qualified Institutional Buyer, Accredited Investor............................... 29
5.10. Acknowledgement Regarding Investors' Purchases of Notes.......................... 29
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5.11 No Net Short Positions........................................................... 29
6. RESTRICTIONS ON TRANSFER............................................................... 29
7. COVENANTS.............................................................................. 30
7.1. Payment of Notes and Maintenance of Office....................................... 30
7.2. Reports.......................................................................... 30
7.3. Taxes............................................................................ 31
7.4. Stay, Extension and Usury Laws................................................... 31
7.5 Restricted Payments.............................................................. 31
7.6. Dividend and Other Payment Restrictions Affecting Material Subsidiaries.......... 32
7.7. Incurrence of Indebtedness and Issuance of Preferred Stock....................... 33
7.8. Asset Sales...................................................................... 35
7.9. Transactions with Affiliates..................................................... 37
7.10. Liens............................................................................ 38
7.11. Corporate Existence.............................................................. 39
7.12. Offer to Repurchase Upon Change of Control....................................... 39
7.13. Limitation on Sale and Leaseback Transactions.................................... 40
7.14. Limitation on Issuances and Sales of Equity Interests of Material
Subsidiaries..................................................................... 40
7.15. Insurance........................................................................ 40
7.16. Merger, Consolidation, or Sale of Assets......................................... 41
7.17. Certain Trading Limitations...................................................... 42
7.18 Payments for Consent............................................................. 42
7.19. Hart-Scott-Rodino................................................................ 42
7.20. Pledges of Securities............................................................ 43
7.21. Securities Law Disclosure; Publicity............................................. 43
7.22. Reimbursement.................................................................... 43
7.23. Avoidance of Conflicts........................................................... 44
8. DEFAULTS AND REMEDIES.................................................................. 44
8.1. Events of Default................................................................ 44
8.2. Acceleration..................................................................... 45
8.3. Other Remedies................................................................... 46
8.4. Waiver of Past Defaults.......................................................... 46
8.5. Control by Majority.............................................................. 46
8.6. Rights of Holders of Notes to Receive Payment.................................... 46
9. CONVERSION PROVISIONS.................................................................. 46
9.1. Conversion at Option of Holders.................................................. 46
9.2. Conversion at Option of Obligors................................................. 47
9.3. Issuance of Certificates......................................................... 48
9.4. No Fractional Shares............................................................. 48
9.5. Merger of Holdings............................................................... 48
9.6. Reclassification of Class A Common Stock......................................... 49
9.7. Reservation of Class A Common Stock.............................................. 49
9.8. Taxes............................................................................ 50
9.9. No Rights or Liabilities as Stockholders......................................... 50
9.10. Limitation on Conversion......................................................... 50
10. REGISTRATION, TRANSFER AND SUBSTITUTION OF NOTES....................................... 51
10.1. Note Register.................................................................... 51
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10.2. Transfer and Conversion of Notes................................................. 51
10.3. Replacement of Notes............................................................. 51
11. GUARANTEES............................................................................. 51
11.1. Execution and Delivery of Agreement Guarantees................................... 51
11.2. Subsidiary Guarantors may Consolidate, Etc. on Certain Terms..................... 52
11.3. Releases Following Sale of Assets................................................ 52
11.4. Application of Certain Terms and Provisions to Holdings and the Subsidiary
Guarantors....................................................................... 53
12. SECURITY AGREEMENTS.................................................................... 53
12.1. Security Agreements.............................................................. 53
12.2. Release of Collateral............................................................ 53
13. CONDITIONS TO CLOSING.................................................................. 54
13.1 Conditions to Obligations of the Investors....................................... 54
13.2 Conditions to the Obligations of the Obligors.................................... 55
13.3 Investment Election in Absence of Closing........................................ 56
14. EXPENSES............................................................................... 56
15. SURVIVAL............................................................................... 56
16. AMENDMENTS AND WAIVERS................................................................. 56
17. NOTICES................................................................................ 57
18. EXECUTION IN COUNTERPARTS.............................................................. 58
19. BINDING EFFECT......................................................................... 58
20. GOVERNING LAW; CHOICE OF FORUM; JURY TRIAL WAIVER...................................... 58
21. MISCELLANEOUS.......................................................................... 59
21.1. Severability..................................................................... 59
21.2. No Waiver........................................................................ 59
21.3. Further Assurances............................................................... 59
21.4. Construction..................................................................... 59
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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 Agreement Guarantee
Exhibit G Form of Voting Agreement
Exhibit H Form of Director Agreement
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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, the "Obligors"), and each of
the investors set forth on the signature pages hereto (each, an "Investor," and
collectively, the "Investors," and together with the Company and Holdings, 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, the Obligors desire to consummate a financing of newly
invested funds by issuing the Obligors' 10% Senior Secured Discount Convertible
Notes due 2009, substantially in the form attached hereto as Exhibit A;
WHEREAS, as an inducement to the Investors to purchase the Notes,
the Obligors hereby agree that (a) each of the Obligors will enter into 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 H, 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, each of the Investors is willing to purchase Notes for the aggregate
purchase price set forth next to its name on Attachment 1; and
WHEREAS, the Parties desire to set forth the terms and conditions of
and to provide for the issuance by the Obligors of the Notes described herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are 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.
"Accreted Value" means, for a given Note, (1) as of any date prior
to January 1, 2006, an amount equal to the sum of (a) the Initial Value of such
Note plus (b) the amount which shall have accreted with respect to such Note
through such date, such accretion to occur on a daily basis and be compounded
semi-annually each June 30 and December 31 at the rate of 10% per annum from the
Closing Date through the date of determination computed on the basis of a
360-day year of twelve 30-day months, and (2) as of any date on or after
January 1, 2006, the principal amount of such Note.
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"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.
"Additional Interest" means interest, if any, accruing on the Notes
pursuant to Section 2.2 of the Registration Rights Agreement.
"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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"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 to
General Motors Corporation or Affiliates thereof ("GM") of the Obligors' Series
GM Senior Secured Convertible Notes due 2009 (the "GM Notes") in the principal
amount of $89,042,387 in lieu of certain guaranteed payments due to GM during
the period from 2003 to 2006 under the Company's Distribution Agreement with GM
(the "Distribution Agreement"), (2) the amendment of the Distribution Agreement
to provide for, among other things, the issuance of the GM 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 GM (the "GM Credit Facility")
to finance certain revenue share payments owed to GM under the Distribution
Agreement or other amounts which may be owed to GM, (5) the issuance of a
warrant to GM 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 Investors or
otherwise on terms reasonably satisfactory to the Majority Holders,
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including the proposed sale of 5,555,556 shares of Class A Common Stock to U.S.
Trust Company (the "US Trust Purchase") and 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 Investors, 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 GM 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 Credit Facility 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 to 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
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(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
(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
Accreted Value of a 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 $3.18 per share of Class A Common Stock.
"Conversion Stock" means the shares of Class A Common Stock that may
be issued upon any 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.
"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 appointed on behalf
of the various secured creditor parties to serve as collateral agent under the
FCC License Subsidiary Pledge Agreement.
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"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.
"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.
"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.
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"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.
"Initial Value" means, for a given Note, the amount set forth
opposite the name of the Investor purchasing such Note on Attachment 1 to this
Agreement. The aggregate Initial Value for all Notes shall be the aggregate
amount set forth opposite the names of all Investors on Attachment 1 to this
Agreement.
"Intercreditor Agreements" means the General Intercreditor Agreement
and the FCC License Subsidiary Pledge Intercreditor Agreement.
"Interest Payment Date" means June 30 and December 31 of each year,
commencing June 30, 2006, provided that (i) if any Additional Interest shall
accrue prior to January 1, 2006, then the initial Interest Payment Date shall
occur on the June 30 or December 31 next following the date on which such
accrual begins, and
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(ii) 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 equal to (i) for the period from the
Closing Date through December 31, 2005, the rate of Additional Interest, if any,
accruing from time to time and (ii) from January 1, 2006 through the date on
which the Notes are paid in full, the rate of 10% per annum plus the rate of
Additional Interest, if any, accruing from time to time.
"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.
"Majority Holders" means (1) as of any time prior to the Closing,
Investors that have agreed to purchase a majority in Initial Value of the Notes
at the Closing as set forth in Attachment 1 and (2) at any time after the
Closing, the Holders of a majority in aggregate principal amount at maturity of
the then outstanding Notes.
"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,
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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.
"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 of 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.
"Notes" means the Obligors' 10% Senior Secured Discount Convertible
Notes due 2009, including any additional such notes paid as interest thereon.
"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.
"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.
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"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.
"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.
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"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;
(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;
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(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;
(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;
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(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
(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.
"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.
"Supermajority Investors" means any combination of Investors and
purchasers in the US Trust Purchase that have agreed to invest at least 66-2/3%
of the amount to be invested at the Closing under this Agreement, as set forth
in Attachment 1 and the US Trust Purchase, taken collectively.
"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
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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).
"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 Voting 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.
"Voting Agreement" means the Voting Agreement, dated as of the date
hereof, by and among certain Investors and other parties named on the signature
pages thereof, as such agreement may be amended, modified or supplemented from
time to time.
"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.
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"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.
2. PURCHASE AND SALE OF THE NOTES; CLOSING
(a) The Obligors have duly authorized $366,300,000 in aggregate
principal amount at maturity of the 10% Senior Secured Discount Convertible
Notes due December 31, 2009, which includes additional Notes issuable after
January 1, 2006 as payment of Interest under Section 3.1, for issuance to the
Investors on the terms and subject to the conditions set forth in this
Agreement. The Notes, including any Notes issued in substitution or exchange
therefor pursuant to this Agreement, will bear interest at the Interest Rate on
the principal amount at maturity of the Notes and will mature on December 31,
2009, unless earlier repurchased, paid 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 Obligors and the
Majority Holders.
(b) Subject to the terms and conditions of this Agreement, each
of the Investors agrees, severally and not jointly, to purchase for cash from
the Obligors at the Closing, and the Obligors agree to sell and issue to each of
the Investors at the Closing, a Note with a principal amount at maturity equal
to the Accreted Value as of December 31, 2005 of a Note with the Initial Value
corresponding to each such Investor on Attachment 1 to this Agreement. Each of
the Obligors and the Investors acknowledges that the Notes are being issued with
an "original issue discount" for federal and state tax purposes. The Obligors'
agreements with each of the Investors are separate agreements, and the sale of
Notes to each of the Investors is a separate sale. 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, provided that the date of the Closing
may be deferred (i) for up to ten Business Days after the satisfaction of such
conditions, as may be mutually agreed upon in writing by the Obligors and
Eastbourne Capital Management, L.L.C., acting in its sole discretion on behalf
of the Noteholders, or (ii) until such later date as may be mutually agreed upon
in writing by the Obligors and the Majority Holders. 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 all of the Investors.
(c) Each Note shall be governed by, and the rights and the
benefits of the Investors determined in accordance with, the terms and
conditions of this Agreement and, to the extent an Investor is party thereto,
the Transaction Documents. Each of the Investors that is a party to the
Noteholders Agreement, by accepting a Note, hereby agrees and acknowledges that
the Note (and the shares of Class A Common Stock into which it may be Converted)
may be offered, sold or otherwise transferred only in accordance with the
provisions of the Noteholders Agreement.
(d) The Accreted Value of a Note, 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 into which such
Accreted Value, premium and interest are Converted in accordance with this
Section 2(d) shall be referred to as "Conversion Stock."
(e) At the Closing, (i) each Party will deliver executed
counterparts of each Transaction Document to which it is a party; (ii) the
Obligors shall deliver to each Investor a Note in the principal amount at
maturity calculated in accordance with Section 2(b) of this Agreement, together
with an Agreement Guarantee of XM Leasing Subsidiary; and (iii) each Investor
shall deliver by wire transfer, to an account or accounts designated by the
Obligors, immediately available funds in an amount equal to the Initial Value
set forth for such Investor on Attachment 1 to this Agreement. The Obligors
shall provide each of the Investors with information as to such wire
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transfers, including information as to the account or accounts to which funds
are to be transferred and the amount of funds to be transferred to each such
account, no later than three Business Days prior to the Closing.
(f) The obligations of each Investor hereunder and under each of
the Transaction Documents are several and not joint with the obligations of any
other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor hereunder or under any
Transaction Document. Nothing contained herein or in any Transaction Document,
and no action taken by any Investor pursuant hereto or thereto, shall be deemed
to constitute the Investors as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Investors are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated hereby or by the Transaction Documents. Each Investor
shall be entitled to independently protect and enforce its rights, including the
rights arising out of this Agreement and out of each of the Transaction
Documents, and it shall not be necessary for any other Investor to be joined as
an additional party in any proceeding for such purpose.
3. INTEREST AND REPAYMENT
With respect to each Note:
3.1. INTEREST ON THE NOTES
Interest will accrue on the principal amount at maturity of the
Notes at the rate of 10% per annum commencing January 1, 2006, and Additional
Interest may accrue on the principal amount at maturity of the Notes at the
rates, and in the circumstances, set forth in Section 2.2 of the Registration
Rights Agreement. All interest on the Notes will be payable in arrears on each
Interest Payment Date. Each payment of interest on the Notes will be made to the
Holder by certified or bank cashier's check or wire transfer of immediately
available funds or by the issuance of additional Notes, 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. Any such written instructions
may provide that the information contained therein shall continue to be in
effect with respect to subsequent interest payments until thereafter modified by
written instructions of such Holder, which modified instructions shall take
effect as of the next Interest Payment Date occurring more than five Business
Days after delivery of such modified instructions. Any Note issued to a Holder
as payment of interest due on an Interest Payment Date will be issued in a
principal amount equal to the amount of such interest, will commence accruing
interest as of the calendar day immediately following such Interest Payment
Date, will otherwise have the same terms as the Notes issued at Closing and will
be subject to the provisions and have the benefits of this Agreement.
Notwithstanding the foregoing, no Additional Interest shall be payable at any
time by the issuance of additional Notes and no other interest shall be payable
by issuance of additional Notes if Additional Interest shall be accruing on the
Notes as of the applicable Interest Payment Date.
3.2. INTEREST AFTER MATURITY
In the event the Obligors shall fail to make any payment of the
principal amount at maturity 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.
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(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 Accreted Value 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 Accreted Value of such Note (or any portion thereof
subject to such Conversion), together with any premium or accrued interest on
such Accreted Value or portion thereof (as the case may be), shall be Converted
into a number of shares of Class A Common Stock equal to the amount of such
Accreted Value, 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.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF XM
Each of the Obligors hereby represents and warrants to and agrees
with the Investors 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.
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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 Investors 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.
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 Investors 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 Investors 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
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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 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 Investors 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 Investors' 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.
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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; (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.
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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.
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.
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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
(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
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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 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 INVESTORS' PURCHASES OF NOTES
The Obligors acknowledge and agree that each of the Investors 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 no Investor is 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 any Investor or any of
their respective representatives or agents in connection with this Agreement and
the transactions contemplated hereby is merely incidental to the Investors'
purchase of the Notes. Each Obligor further represents to each 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 INVESTORS
Each of the Investors, severally and not jointly and as to itself
only, represents and warrants to and agrees with each Obligor that as of the
date hereof:
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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 its management has
requested.
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 a 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.
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5.7. ORGANIZATION, GOOD STANDING, CORPORATE AUTHORITY
It (other than an individual Investor) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, with requisite corporate or partnership power and authority to
enter into this Agreement and the Transaction Documents to which it is to be a
party and to consummate the transactions contemplated hereby and thereby,
including the purchase of the Notes to be acquired by it hereunder.
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, an institutional Accredited
Investor, or an Accredited Investor, as will be indicated to the Obligors in
writing prior to the Closing, 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 INVESTORS' PURCHASES 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. It represents to each of the other Investors that it has
been solely responsible for its own "due diligence" investigation of the
Obligors and their respective management personnel and businesses, and for its
own analysis of the merits and risks of this investment. It agrees that no
Investor nor the respective controlling persons, officers, directors,
shareholders, investors partners, agents or employees of any such Investor shall
be liable to any other Investor for any actions taken in connection with the
purchase of Notes in accordance with the terms of this Agreement.
5.11 NO NET SHORT POSITIONS
As of the date hereof through the time of filing of a Current Report
on Form 8-K on the Business Day succeeding the date hereof (as contemplated by
the first sentence of Section 7.21 hereof), it has no Net Short Position (as
defined in Section 7.17), without giving any effect to the proposed purchase of
Notes contemplated hereby.
6. RESTRICTIONS ON TRANSFER
(a) Each of the Investors party to the Noteholders Agreement
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. Each Investor
acknowledges that each certificate representing Securities will contain a legend
substantially to the following effect:
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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 the resale of such Securities under the Securities Act, (ii)
following any sale of such Securities pursuant to Rule 144 under the Securities
Act, (iii) if such Securities are eligible for sale under Rule 144(k), or (iv)
if such legend is not, in the opinion of counsel to Holdings, required in the
circumstances under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the Staff of the SEC).
(b) In addition, each Investor party to the Noteholders Agreement
acknowledges that each certificate issued to such Investor to represent
Securities will contain a legend substantially to the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE THE SUBJECT
OF A CERTAIN SHAREHOLDERS AND NOTEHOLDERS AGREEMENT WHICH, AMONG
OTHER THINGS, CONTAINS RESTRICTIONS ON THE TRANSFER OF SUCH
SECURITIES. A COPY OF THE SHAREHOLDERS AND NOTEHOLDERS AGREEMENT
IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF XM
SATELLITE RADIO INC. AND XM SATELLITE RADIO HOLDINGS INC.
Upon termination of the Noteholders Agreement, the Obligors shall remove the
applicable legend from the certificate(s) representing such Securities promptly
upon request of the Holder thereof and shall promptly deliver replacement
certificate(s) to such Holder.
7. COVENANTS
The Obligors hereby covenant and agree with each Investor as
follows, it being understood that prior to the Closing only those covenants
specified in Sections 7.2, 7.18, 7.19, 7.21 and 7.23 shall be in effect.
7.1. PAYMENT OF NOTES AND MAINTENANCE OF OFFICE
The Obligors will punctually pay or cause to be paid the principal,
premium (if any) and interest due in respect of each Note according to the terms
thereof and hereof and will maintain an office within the continental boundaries
of the United States of America where notices, presentations and demands in
respect of this Agreement and the Notes may be made upon them and will notify
the Holders of such Notes of any change of location of such office. Such office
is presently maintained at 1500 Eckington Place, NE, Washington, DC 20002.
7.2. REPORTS
So long as any Notes are outstanding, each of the Obligors shall
file with the SEC, within the time periods specified in the SEC's rules and
regulations, periodic reports on Forms 10-Q, 10-K and 8-K (or any successor
forms). If at any time an Obligor is not required to file such reports, such
Obligor (as the case may be) shall furnish to the Holders within such time
periods: (i) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if such
Obligor were required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual financial statements only, a report thereon by the certified
independent accountants of
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such Obligor and (ii) all information that would be required to be filed with
the SEC on Form 8-K if such Obligor were required to file such reports.
7.3. TAXES
Each of the Obligors shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
7.4. STAY, EXTENSION AND USURY LAWS
Each of the Obligors and the Subsidiary Guarantors covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of this Agreement;
and each of the Obligors and the Subsidiary Guarantors (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any rights of the Holders, but shall suffer and
permit the execution of every such right as though no such law has been enacted.
Notwithstanding any provision to the contrary contained in any Note or
Transaction Document, it is expressly agreed and provided that the total
liability of the Obligors under the Notes for payments in the nature of interest
shall not exceed the maximum lawful rate authorized under applicable law, and,
without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Obligors may be obligated to pay under the Notes
exceed such maximum lawful rate. It is agreed that if the maximum contract rate
of interest allowed by law and applicable to the Notes is increased or decreased
by statute or any official governmental action subsequent to the date hereof,
the new maximum contract rate of interest allowed by law will be the maximum
lawful rate of interest applicable to the Notes from the effective date forward,
unless such application is precluded by applicable law. If under any
circumstances whatsoever, interest in excess of the maximum lawful rate is paid
by the Obligors to any Investor with respect to indebtedness evidenced by the
Notes, such excess shall be applied by such Investor to the unpaid principal
balance of any such indebtedness or be refunded to the Obligors, the manner of
handling such excess to be at such Investor's election.
7.5 RESTRICTED PAYMENTS
Neither of the Obligors shall directly or indirectly (through a
Material Subsidiary or otherwise): (i) declare or pay any dividend or make any
other payment or distribution on account of the Equity Interests of either
Obligor (including any payment in connection with any merger or consolidation
involving an Obligor) or to the direct or indirect holders of such Equity
Interests in their capacities as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of an Obligor and
cash in lieu of fractional interests not to exceed 1% of the Equity Interests
distributed or paid); (ii) other than pursuant to a Parent Company Merger,
purchase, redeem or otherwise acquire or retire for value (including in
connection with any merger or consolidation involving an Obligor) any Equity
Interests of an Obligor (other than any such Equity Interests owned by an
Obligor or any of its Material Subsidiaries) or any Affiliate of an Obligor
(other than any of its Material Subsidiaries); (iii) make any payment on or with
respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated in right of payment to the Notes
except a payment of interest or a payment of principal at Stated Maturity
thereof; or (iv) make any Investment other than a Permitted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments").
So long as no Default has occurred and is continuing or would be
caused thereby, the foregoing provisions shall not prohibit: (1) the redemption,
repurchase, retirement, defeasance or other acquisition of any Subordinated
Indebtedness of an Obligor or of any Equity Interests of Holdings in exchange
for, or out of the net cash proceeds of the substantially concurrent sale (other
than to a Subsidiary of an Obligor) of, Equity Interests of Holdings (other than
Disqualified Stock) and cash payments in lieu of fractional interests not to
exceed 1% of the
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Equity Interests so redeemed, repurchased, retired, defeased or otherwise
acquired; (2) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness of an Obligor in exchange for,
or out of the net cash proceeds of a substantially concurrent incurrence (other
than to a Subsidiary of an Obligor) of, Permitted Refinancing Indebtedness; (3)
the declaration or payment of any dividend or distribution by a Wholly Owned
Subsidiary of an Obligor to the holders of its common Equity Interests; (4) the
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of Holdings or any Subsidiary thereof held by any member of
such Obligor's (or any of its Subsidiaries') management pursuant to any
management equity subscription agreement or stock option agreement in effect as
of the date hereof; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$250,000 in any twelve-month period; (5) the purchase of any Subordinated
Indebtedness of an Obligor at a purchase price not greater than 100% of the
principal amount or accreted value thereof, as the case may be, together with
accrued interest, if any, following an Asset Sale in accordance with provisions
similar to those contained in Section 7.8; provided, however, that prior to
making any such purchase the Obligor has made the Excess Proceeds Offer as
provided in such covenant with respect to the Notes and has purchased all Notes
validly tendered for payment in connection with such Excess Proceeds Offer; (6)
making payments to dissenting shareholders pursuant to applicable law in
connection with a consolidation or merger of an Obligor made in compliance with
the provisions of this Agreement; (7) Investments, other than Permitted
Investments, in an amount equal to 100% of Total Incremental Equity determined
as of the date any such Investment is made; (8) the purchase of (a) any
Subordinated Indebtedness of an Obligor at a purchase price not greater than
101% of the principal amount or accreted value thereof, as the case may be,
together with accrued interest, if any, in the event of a Change of Control in
accordance with provisions similar to those of Section 7.12 or (b) any Preferred
Stock of an Obligor at a purchase price not greater than 101% of the liquidation
preference thereof, together with accrued dividends, if any, in the event of a
Change of Control in accordance with provisions similar to those of Section
7.12; provided, however, that, in each case, prior to such purchase the Obligors
have made the Change of Control Offer required by this Agreement with respect to
the Notes and have purchased all Notes validly tendered for payment in
connection with such Change of Control Offer; (9) the payment of any dividend
required pursuant to the Tax Sharing Agreement between the Obligors, as such is
in effect on the date hereof; and (10) any payments required by Section 9.7(b).
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the assets or
securities proposed to be transferred or issued to or by an Obligor pursuant to
the Restricted Payment. The fair market value of any assets or securities that
are required to be valued by this covenant shall be determined by the Board of
Directors of such Obligor whose Board Resolution with respect thereto shall be
conclusive. Such Board of Directors' determination must be based upon an opinion
or appraisal issued by an accounting, appraisal or investment banking firm of
national standing if the fair market value of such assets or securities exceeds
$20,000,000.
7.6. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING MATERIAL
SUBSIDIARIES
Neither of the Obligors shall, or permit any of the Material
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Material Subsidiary to (a) pay dividends or make any other distributions on its
Capital Stock to such Obligor or any of its Material Subsidiaries or with
respect to any other interest or participation in, or measured by, its profits
or pay any indebtedness owed to either of the Obligors or any of the Material
Subsidiaries, (b) make loans or advances to either of the Obligors or any of the
Material Subsidiaries, (c) transfer any of its properties or assets to either of
the Obligors or any of the Material Subsidiaries, or (d) guarantee any
Indebtedness of either of the Obligors or any of the Material Subsidiaries.
However, the preceding restrictions will not apply to encumbrances
or restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date hereof, and
any amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other
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payment restrictions than those contained in such Existing Indebtedness or
Indebtedness pursuant to the Concurrent Financing Transactions, as in effect on
the date hereof;
(2) Indebtedness pursuant to the Notes and this Agreement;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a
Person acquired by either of the Obligors or any of the Material Subsidiaries as
in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Agreement to
be incurred;
(5) customary non-assignment provisions in leases or contracts or
real property mortgages or related documents entered into in the ordinary course
of business and consistent with past practices;
(6) purchase money obligations, Capital Lease Obligations or
mortgage financings that impose restrictions on the property so acquired of the
nature described in clause (c) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a Material
Subsidiary that restricts distributions by that Subsidiary pending its sale or
other disposition;
(8) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness that limit the right of the
debtor to dispose of the assets subject to such Lien;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, asset sale agreements, stock
sale agreements and other similar agreements entered into in the ordinary course
of business; and
(11) restrictions on cash or other deposits or net worth imposed
by customers under contracts entered into in the ordinary course of business.
7.7. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
Neither of the Obligors shall, or shall permit any of its Material
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and neither of the Obligors shall issue any Disqualified Stock.
Neither of the Obligors shall incur any Indebtedness (including
Permitted Debt) that is contractually subordinated in right of payment to any
other Indebtedness of such Obligor unless such Indebtedness is also
contractually subordinated to the Notes on substantially identical terms;
provided, however, that no Indebtedness of such Obligor shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of such
Obligor solely by virtue of being unsecured.
The provisions of the first paragraph of this Section 7.7 shall not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by an Obligor of Pari Passu
Indebtedness in an aggregate principal amount (including the
aggregate principal amount of all Permitted Refinancing
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Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (i)), which does not
exceed $100,000,000 (in the aggregate for both Obligors), provided
that (A) no more than $50,000,000 thereof (less any amount of
Indebtedness incurred under clause (xii) below) may consist of
Indebtedness under revolving credit working capital facilities
entered into with one or more commercial bank or similar
institutional lenders and (B) none of which may consist of
Indebtedness under any other type of borrowing arrangement with a
commercial bank or similar institutional lender;
(ii) unsecured Subordinated Indebtedness or Disqualified
Stock of an Obligor incurred to finance the construction, expansion,
development or acquisition of music libraries and other recorded
music programming, furniture, fixtures and equipment (including
satellites, ground stations and related equipment) if such
Subordinated Indebtedness or Disqualified Stock, as applicable, has
a Weighted Average Life to Maturity longer than the Weighted Average
Life to Maturity of the Notes and has a final Stated Maturity of
principal later than the Stated Maturity of principal of the Notes;
(iii) unsecured Subordinated Indebtedness or Disqualified
Stock of an Obligor in an aggregate principal amount (or liquidation
preference, as applicable) (including the aggregate principal amount
(or liquidation preference, as applicable) of all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness or Disqualified Stock, as applicable, incurred
pursuant to this clause (iii)) at any time outstanding not to exceed
the product of (a) $100.00 and (b) the number of Subscribers at such
time if such Subordinated Indebtedness or Disqualified Stock, as
applicable, has a Weighted Average Life to Maturity longer than the
Weighted Average Life to Maturity of the Notes and has a final
Stated Maturity of principal later than the Stated Maturity of
principal of the Notes;
(iv) the incurrence by an Obligor or a Material Subsidiary
of Existing Indebtedness and the incurrence by an Obligor or a
Material Subsidiary of Indebtedness pursuant to the Concurrent
Financing Transactions;
(v) the incurrence by the Obligors of the Indebtedness
represented by the Notes;
(vi) the incurrence by an Obligor or a Material Subsidiary
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case, incurred for
the purpose of financing all or any part of the purchase price or
cost of acquisition, construction or improvement of (A) replacement
satellites and related equipment and launches in an aggregate
principal amount (or initial accreted value if such indebtedness is
issued with original issue discount), including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (vi)(A), not to
exceed $200,000,000 at anytime outstanding in the aggregate for both
of the Obligors and all of the Material Subsidiaries and (B)
property, plant or equipment used in the business of such Obligor or
Material Subsidiary, in an aggregate principal amount, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (vi), not
to exceed $30,000,000 at any time outstanding in the aggregate for
both of the Obligors and all of the Material Subsidiaries;
(vii) the incurrence by an Obligor or a Material Subsidiary
of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was
permitted by this Agreement to be incurred under clauses (i), (ii),
(iii), (iv), (v), (vi), (xii), (xiii), (xiv) or (xv) of this
paragraph;
(viii) the incurrence by an Obligor or a Material Subsidiary
of intercompany Indebtedness between or among such Obligor and any
of its Material Subsidiaries; provided, however, that: (a) if such
Obligor is the obligor on such Indebtedness, such Indebtedness must
be expressly subordinated to the prior payment in full in cash of
all Obligations with respect to the Notes; and (b) (i) any
subsequent issuance or transfer of Equity Interests that results in
any such
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Indebtedness being held by a Person other than such Obligor or a
Material Subsidiary thereof and (ii) any sale or other transfer of
any such Indebtedness to a Person that is not either such Obligor or
a Material Subsidiary thereof; shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by such Obligor or
such Material Subsidiary, as the case may be, that was not permitted
by this clause (viii);
(ix) the incurrence by an Obligor of Hedging Obligations
that are incurred for the sole purpose of fixing or hedging (x)
interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of this Agreement to be outstanding
or (y) fluctuation in currency values;
(x) the accrual of interest, the accretion or amortization
of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same
terms, and the payment of dividends on Disqualified Stock in the
form of additional shares of the same class of Disqualified Stock
will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Stock for purposes of this covenant;
(xi) the incurrence by an Obligor of additional
Indebtedness (including Acquired Debt) or Disqualified Stock in an
aggregate principal amount (or liquidation preference or accreted
value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any Indebtedness or Disqualified Stock incurred pursuant to
this clause (xi), not to exceed $30,000,000 in the aggregate for
both Obligors;
(xii) Indebtedness the proceeds of which are utilized solely
to finance working capital in an aggregate principal amount not to
exceed the lesser of (a) $50,000,000 and (b) 80% of Qualified
Receivables (in the aggregate for both Obligors);
(xiii) 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;
(xiv) Indebtedness for which the Obligors have received
consent of the Note Investors (as defined therein) in accordance
with Section 5.1 of the Noteholders Agreement; and
(xv) any Qualified Sale and Leaseback Transaction.
For purposes of determining compliance with this Section 7.7, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xv) above, an
Obligor shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this Section 7.7 and such item of Indebtedness shall
be treated as having been incurred pursuant to only one of such clauses.
7.8. ASSET SALES
Neither of the Obligors shall, or shall permit any of its Material
Subsidiaries to, consummate an Asset Sale unless (x) such Obligor or Material
Subsidiary receives consideration at the time of such Asset Sale at least equal
to the fair market value of the assets or Equity Interests issued, sold or
otherwise disposed of; (y) such fair market value shall be determined by such
Obligor's Board of Directors (whose good faith determination shall be
conclusive) and evidenced by a Board Resolution; and (z) at least 75% of the
consideration received therefore by such Obligor or Material Subsidiary is in
the form of cash or Cash Equivalents; provided, however, that the amount of (A)
any liabilities (as shown on such Obligor's or Material Subsidiary's most recent
balance sheet or in the notes thereto) of such Obligor or Material Subsidiary
(other than contingent liabilities and liabilities that are by their terms
contractually subordinated in right of payment to the Notes or any Guarantee
thereof) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases such Obligor or Material Subsidiary
from further liability and (B) any securities, notes or other obligations
received by such Obligor or
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Material Subsidiary from such transferee that are converted by such Obligor or
Material Subsidiary into cash (to the extent of the cash received in that
conversion) within 30 days of receipt thereof, shall be deemed to be cash for
purposes of this provision.
A transfer of assets by the Company to a Material Subsidiary or by a
Material Subsidiary to an Obligor or to another Material Subsidiary, and an
issuance of Equity Interests by a Material Subsidiary to an Obligor or to
another Material Subsidiary, shall not be deemed to be an Asset Sale. Any
Restricted Payment that is permitted by Section 7.5 hereof will not be deemed to
be an Asset Sale.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Obligor or a Material Subsidiary may (a) apply the Net Proceeds from
such Asset Sale, at its option, (i) to acquire all or substantially all of the
assets of, or a majority of the Voting Stock of, another Permitted Business, or
Voting Stock of a Subsidiary engaged in a Permitted Business (other than any
such Voting Stock owned or held by an Obligor or a Material Subsidiary), (ii) to
make a capital expenditure, or (iii) to acquire other assets that are used or
useful in a Permitted Business that have an expected useful life of one year or
longer; (b) enter into a legally binding agreement to apply such Net Proceeds as
described in the preceding clause (a) within six months after such agreement is
entered into and apply such Net Proceeds in accordance with the terms of such
agreement or the provisions of clause (a) above; provided that if such agreement
terminates such Obligor shall have until the earlier of (i) 90 days after the
date of such termination and (ii) six months after the date of the Asset Sale
resulting in such Net Proceeds to effect such an application; or (c) permanently
repay (and reduce the commitments with respect to) Pari Passu Indebtedness and
the Notes, pro rata. Pending the final application of any such Net Proceeds, the
Obligor or a Material Subsidiary may temporarily reduce revolving credit
borrowings or otherwise invest such Net Proceeds in any manner that is not
prohibited by this Agreement. Any Net Proceeds from such Asset Sale that are not
finally applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." Within five days of each date on
which the aggregate amount of Excess Proceeds exceeds $10,000,000, the Obligors
shall commence an offer (an "Asset Sale Offer") pursuant to this Section 7.8 to
all Holders of Notes and all holders of Pari Passu Indebtedness containing
provisions similar to those set forth in this Agreement with respect to offers
to purchase or redeem with the proceeds of sales of assets (including the
Indebtedness under the Indenture) to purchase the maximum principal amount (or,
if applicable, accreted value) of Notes and such Pari Passu Indebtedness that
may be purchased out of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the Accreted Value of the Notes or the accreted value or
principal amount (as appropriate) of such Pari Passu Indebtedness, plus accrued
and unpaid interest thereon, if any, to the date fixed for the closing of such
offer, in accordance with the procedures set forth in this Section 7.8. To the
extent that the aggregate amount of Accreted Value of the Notes tendered
pursuant to an Asset Sale Offer, together with any accrued and unpaid interest
thereon, is less than the Excess Proceeds, the Obligors may use such difference
for any purpose not otherwise prohibited by this Agreement. If the aggregate
Accreted Value of the Notes and accreted value or principal amount (as
appropriate) of such Pari Passu Indebtedness tendered into such Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such Pari Passu Indebtedness to be purchased on a pro rata basis based on the
Accreted Value of the Notes and the accreted value or principal amount (as
appropriate) of such Pari Passu Indebtedness. Upon completion of each Asset Sale
Offer, the amount of Excess Proceeds shall be deemed to be reset at zero.
The Obligors shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sales
provisions of this Agreement, the Obligors shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the Asset Sale provisions of this Agreement by virtue of such
conflict.
In the event that the Obligors shall be required to commence an
Asset Sale Offer, they shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Obligors shall purchase the Accreted Value of Notes required to be
purchased pursuant to this Section 7.8 (the
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"Offer Amount") or, if less than the Offer Amount has been tendered, all Notes
tendered in response to the Asset Sale Offer. Payment for any Notes so purchased
shall be made in cash.
Any accrued and unpaid interest on the Notes so purchased shall be
paid to the Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Obligors shall
send a notice to the Holders. The notice shall contain all instructions and
materials necessary to enable such Holders to tender Notes pursuant to the Asset
Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 7.8 and the length of time the Asset Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrete or accrue interest;
(d) that, unless the Obligors default in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to
any Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Obligors at the address specified in the notice at least three
days before the Purchase Date;
(f) that Holders shall be entitled to withdraw their election if
the Obligors receive, not later than the expiration of the Offer Period, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing its election to have such Note
purchased;
(g) that, if the aggregate Accreted Value of Notes surrendered by
Holders exceeds the Offer Amount, the Obligors shall select the Notes to be
purchased on a pro rata basis; and
(h) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount at maturity to the unpurchased
portion of the Notes surrendered.
On or before the Purchase Date, the Obligors shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered.
The Obligors shall promptly (but in any case not later than five Business Days
after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Obligors for purchase, and the Obligors shall promptly issue a new Note, and
shall mail or deliver such new Note to such Holder, in a principal amount at
maturity equal to any unpurchased portion of the Note surrendered. Any Note not
so accepted shall be promptly mailed or delivered by the Obligors to the Holder
thereof.
7.9. TRANSACTIONS WITH AFFILIATES
Neither of the Obligors shall, or shall permit any of its Material
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless: (a) such Affiliate
Transaction is on terms that are no less favorable to such Obligor or Material
Subsidiary than those that would have been obtained in a comparable transaction
by such Obligor or such Material Subsidiary with an unrelated Person; and (b)
(i) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate
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consideration in excess of $5,000,000, if an opinion meeting the requirements
set forth in clause (ii) of this paragraph has not been obtained, such Affiliate
Transaction has been approved by a majority of the members of such Obligor's
Board of Directors who have no direct financial interest in such Affiliate
Transaction (other than as a stockholder of such Obligor), and (ii) with respect
to (x) any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $20,000,000, or (y) any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $5,000,000 where none of the members of such
Obligor's Board of Directors qualify as having no direct financial interest in
such Affiliate Transaction (other than as a stockholder of such Obligor), such
Obligor obtains an opinion as to the fairness to such Obligor or such Material
Subsidiary of such Affiliate Transaction from a financial point of view issued
by an accounting, appraisal or investment banking firm of national standing;
provided however that the following items shall not be deemed to be Affiliate
Transactions and, therefore, will not be subject to the provisions of this
paragraph:
(1) any transaction by an Obligor or any Material Subsidiary with
an Affiliate directly related to the purchase, sale or distribution of products
in the ordinary course of business consistent with industry practice which has
been approved by a majority of the members of the Board of Directors who are
disinterested with respect to such transaction;
(2) any employment agreement or arrangement or employee benefit
plan entered into by an Obligor or any of its Material Subsidiaries in the
ordinary course of business of such Obligor or such Material Subsidiary;
(3) transactions between or among an Obligor and its Material
Subsidiaries;
(4) payment of reasonable directors fees and provisions of
customary indemnification to directors, officers and employees of an Obligor and
its Material Subsidiaries;
(5) sales of Equity Interests (other than Disqualified Stock) to
Affiliates of an Obligor;
(6) Restricted Payments that are permitted by the provisions of
Section 7.5 hereof (other than clause (7) thereof);
(7) transactions pursuant to the Tax Sharing Agreement;
(8) contractual arrangements existing on the date hereof, and any
renewals, extensions, implementations or modifications thereof that are not
materially adverse to the Holders;
(9) the Concurrent Financing Transactions (including all
agreements evidencing the same in substantially the form provided to the
Investors on December 19, 20 or 21, 2002 and arrangements contemplated thereby);
and
(10) a Parent Company Merger.
7.10. LIENS
Neither of the Obligors shall, or shall permit any of its Material
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien of any kind (other than Permitted Liens) upon any of
their property or assets, now owned or hereafter acquired, other than any Liens
for which the Obligors have received consent of the Note Investors (as defined
therein) in accordance with Section 5.1 of the Noteholders Agreement.
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7.11. CORPORATE EXISTENCE
Subject to Section 7.16 hereof, each Obligor shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Material Subsidiaries, in accordance with the respective organizational
documents thereof (as the same may be amended from time to time) and (ii) the
rights (charter and statutory), licenses and franchises thereof; provided,
however, that neither Obligor shall be required to preserve any such right,
license or franchise, or the corporate, partnership or other existence of any of
its Material Subsidiaries, if the Board of Directors of such Obligor, shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of such Obligor, taken as a whole with its Subsidiaries, and that
the loss thereof is not adverse in any material respect to the Holders of the
Notes; provided further, that nothing in this Section 7.11 shall prohibit a
Parent Company Merger.
7.12. OFFER TO REPURCHASE UPON CHANGE OF CONTROL
(a) Upon the occurrence of a Change of Control, the Obligors
shall make an offer (a "Change of Control Offer") to each Holder to repurchase
all or any part (equal to $1,000 or an integral multiple thereof) of each
Holder's Notes at a purchase price equal to 101% of the Accreted Value thereof
plus accrued and unpaid interest, if any, to the date of purchase (the "Change
of Control Payment"). Within 30 days following any Change of Control, the
Obligors shall mail a notice to each Holder stating: (1) that the Change of
Control Offer is being made pursuant to this Section 7.12 and that all Notes
tendered will be accepted for payment; (2) the purchase price and the purchase
date, which shall be no earlier than 30 and no later than 60 calendar days from
the date such notice is mailed (the "Change of Control Payment Date"); (3) that
any Note not tendered will continue to accrete or accrue interest; (4) that,
unless the Obligors default in the payment of the Change of Control Payment, all
Notes accepted for payment pursuant to the Change of Control Offer shall cease
to accrete or accrue interest after the Change of Control Payment Date; (5) that
Holders electing to have any Notes purchased pursuant to a Change of Control
Offer will be required to surrender the Notes, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes completed, to the Obligors
at the address specified in the notice prior to the close of business on the
third Business Day preceding the Change of Control Payment Date; (6) that
Holders will be entitled to withdraw their election if the Obligors receive, not
later than the close of business on the second Business Day preceding the Change
of Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount at maturity of Notes
delivered for purchase, and a statement that such Holder is withdrawing his
election to have the Notes purchased; and (7) that Holders whose Notes are being
purchased only in part will be issued new Notes equal in principal amount at
maturity to the unpurchased portion of the Notes surrendered, which unpurchased
portion must be equal to $1,000 in principal amount at maturity or an integral
multiple thereof. The Obligors shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes in connection with a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the Change of
Control provisions of this Agreement, the Obligors will comply with the
applicable securities laws and regulations and will not be deemed to have
breached their obligations under the Change of Control provisions of this
Agreement by virtue of such conflict.
(b) On the Change of Control Payment Date, the Obligors shall, to
the extent lawful, accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer. The Obligors shall promptly
mail to each Holder of Notes so tendered the Change of Control Payment for such
Notes, and shall promptly mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount at maturity to any unpurchased
portion of the Notes surrendered by such Holder, if any; provided, that each
such new Note shall be in a principal amount at maturity of $1,000 or an
integral multiple thereof. The Obligors shall publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
(c) The Obligors shall not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Agreement applicable to a Change of Control Offer
made by the Obligors and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
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7.13. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
Neither of the Obligors shall, or shall permit any of its Material
Subsidiaries to, enter into any sale and leaseback transaction; provided that an
Obligor may enter into a sale and leaseback transaction if: (i) the lease is for
a period, including renewal rights, of not in excess of five years; (ii) the
transaction is solely between such Obligor and any Material Subsidiary or solely
between Material Subsidiaries; (iii) such Obligor or such Material Subsidiary,
within 12 months after the sale or transfer of any assets or properties is
completed, applies an amount not less than the Net Proceeds received from such
sale in accordance with Section 7.8 hereof; or (iv) such sale and leaseback
transaction is a Qualified Sale and Leaseback Transaction.
7.14. LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS OF MATERIAL
SUBSIDIARIES
Neither of the Obligors (i) shall, or shall permit any of its
Material Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of
any Equity Interests in a Material Subsidiary of such Obligor to any Person or
(ii) shall permit any of its Material Subsidiaries to issue any Equity Interests
other than:
(a) to an Obligor or another Material Subsidiary;
(b) issuances of directors' qualifying shares to the extent
necessary to comply with applicable law;
(c) to the extent required by applicable law, issuances or
transfers to nationals of the jurisdiction in which a Material Subsidiary is
organized in an amount not to exceed 1% of the total Equity Interests of such
Material Subsidiary;
(d) distributions of Capital Stock other than Disqualified Stock
to all common shareholders of a Material Subsidiary on a pro rata basis; or
(e) the sale of all the Equity Interests in such Material
Subsidiary (excluding the Company), provided that the cash Net Proceeds from
such transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 7.8 hereof.
7.15. INSURANCE
(a) The Obligors shall obtain prior to the launch of each
satellite and shall maintain launch insurance with respect to each satellite
launch covering the period from the launch to 180 days following the launch of
each satellite in an amount equal to or greater than the sum of (1) the cost to
replace such satellite with a satellite of comparable or superior technological
capability (as determined by the Board of Directors of Holdings, whose
determination shall be conclusive and evidenced by a Board Resolution) and
having at least as much transmission capacity as the satellite to be replaced,
(2) the cost to launch a replacement satellite pursuant to the contract whereby
a replacement satellite will be launched and (3) the cost of launch insurance
for such replacement or, in the event that the Obligors have reason to believe
that the cost of obtaining comparable insurance for a replacement would be
materially higher, the Obligors' best estimate of the cost of such comparable
insurance (in each case such costs being determined as of the date such
insurance is procured by the Board of Directors of Holdings, whose determination
shall be conclusive and evidenced by a Board Resolution). Notwithstanding the
foregoing, at any time when the Obligors have two primary satellites in orbit
and fully functioning, the Obligors shall not be obligated to obtain insurance
pursuant to this paragraph (a) with respect to the launch of any satellite that
the Obligors do not intend to use as a replacement for one of the two primary
satellites used by them to provide the XM Radio Service.
(b) The Obligors shall maintain full in-orbit insurance with
respect to each satellite they own and launch in an amount at least equal to the
sum of (1) the cost to replace such satellite with a satellite of comparable or
superior technological capability (as determined by the Board of Directors of
Holdings, whose determination shall be conclusive and evidenced by a Board
Resolution) and having at least as much transmission capacity as the satellite
to be replaced (or such percentage of replacement value as is then reasonably
obtainable in
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the insurance market at a commercially reasonable cost), (2) the cost to launch
a replacement satellite pursuant to the contract pursuant to which a replacement
satellite will be launched and (3) the cost of launch insurance for such
replacement or, in the event that the Obligors have reason to believe that the
cost of obtaining comparable insurance for a replacement would be materially
higher, the Obligors' best estimate of the cost of such comparable insurance
(provided, however, that with respect to any satellite as to which there has
been an insured loss, the required amount of such insurance shall equal the
lesser of such sum and the amount reasonably obtainable in the insurance market
at a commercially reasonable cost, as determined by the Board of Directors of
Holdings, whose determination shall be conclusive and evidenced by a Board
Resolution). The in-orbit insurance required by this paragraph shall provide
that if 50% or more of a satellite's capacity is lost, the full amount of
insurance shall become due and payable, and that if a satellite is able to
maintain more than 50% but less than 100% of its capacity, a portion of such
insurance shall become due and payable.
(c) In the event that the Obligors receive proceeds from
insurance relating to any satellite, the Obligors shall be entitled to use all
or any portion of such proceeds for any purpose, including (1) to repay any
vendor or third-party purchase money financing pertaining to such satellite that
is required to be repaid by reason of the loss giving rise to such insurance
proceeds, (2) to develop and construct a replacement satellite, or (3) general
corporate purposes.
7.16. MERGER, CONSOLIDATION, OR SALE OF ASSETS
(a) Neither of the Obligors shall, directly or indirectly,
consolidate or merge with or into (whether or not such Obligor is the surviving
corporation), or sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of such Obligor and its Material
Subsidiaries taken as a whole, in one or more related transactions to, another
Person unless (i) such Obligor is the surviving corporation or the Person formed
by or surviving any such consolidation or merger (if other than such Obligor) or
to which such sale, assignment, transfer, conveyance or other disposition shall
have been made is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia, (ii) the Person
formed by or surviving any such consolidation or merger (if other than such
Obligor) or the Person to which such sale, assignment, transfer, conveyance or
other disposition shall have been made assumes all the obligations of the
Obligors under the Registration Rights Agreement, the Security Agreements, the
Intercreditor Agreements, the Notes and this Agreement pursuant to agreements in
a form reasonably satisfactory to the Majority Holders, (iii) immediately after
such transaction, no Default or Event of Default exists and (iv) such Obligor or
the Person formed by or surviving any such consolidation or merger (if other
than such Obligor), or to which such sale, assignment, transfer, conveyance or
other disposition shall have been made (A) shall have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of such Obligor immediately preceding the transaction and (B) shall, on
the date of such transaction after giving pro forma effect thereto and any
related financing transactions as if the same had occurred at the beginning of
such Obligor's latest four fiscal quarters for which consolidated financial
statements of such Obligor are available immediately preceding the date of such
transaction, have a ratio of Total Consolidated Indebtedness to Adjusted
Consolidated Operating Cash Flow for such four-quarter period less than 6.0 to
1.0.
In addition, each Obligor shall not, directly or indirectly, lease
all or substantially all of its properties or assets, in one or more related
transactions, to any other Person. The provisions of this Section 7.16(a) shall
not be applicable to a consolidation, merger, sale, assignment, transfer,
conveyance or other disposition of properties or assets between or among (i)
either Obligor and its Material Subsidiaries or (ii) the Obligors.
(b) Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of an Obligor in accordance with Section 7.16(a) hereof, the
successor corporation formed by such consolidation or into or with which such
Obligor is merged or to which such sale, assignment, transfer, lease, conveyance
or other disposition is made shall succeed to, and be substituted for (so that
from and after the date of such consolidation, merger, sale, lease, conveyance
or other disposition, the provisions of this Agreement referring to such
"Obligor" shall refer instead to the successor corporation), and may exercise
every right and power of such Obligor under this Agreement with the same effect
as if such successor Person had been named as such Obligor herein; provided,
however, that the predecessor Obligor shall not be relieved from the obligation
to pay the principal of and interest (and premium, if any) on the Notes except
in the
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case of a sale, assignment, transfer, conveyance or other disposition of all of
the Obligor's assets that meets the requirements of Section 7.16(a) hereof.
7.17. CERTAIN TRADING LIMITATIONS
For so long as an Investor holds at least $10,000,000 in principal
amount at maturity of the Notes originally purchased by such Investor under this
Agreement, such Investor agrees that it will not enter into any Short Sales. For
purposes of this Section 7.17, a "Short Sale" by an Investor means to sell,
contract to sell, grant any option to purchase, or make any short sale of Class
A Common Stock, establish a "put equivalent position" (as such term is defined
in Rule 16a-1(h) under the Exchange Act) or engage in any transaction the result
of which will involve any of the foregoing, at a time when such Investor has no
equivalent offsetting long position in Class A Common Stock or preferred stock
or indebtedness convertible into Class A Common Stock (a "Net Short Position").
For purposes of determining whether an Investor has an equivalent offsetting
long position in Class A Common Stock, all Class A Common Stock held by such
Investor, all Conversion Stock that would be issuable upon Conversion in full of
all Notes then held by such Investor (assuming that such Notes were then fully
Convertible, notwithstanding any provisions to the contrary, and giving effect
to any Conversion Price adjustments scheduled to take effect in the future) and
all shares of Class A Common Stock issuable upon conversion of Holdings'
outstanding preferred stock and Holdings' outstanding 7.75% Convertible
Subordinated Notes, exercise of any call option or "call equivalent position"
(as defined in Rule 16a-1(b) under the Exchange Act) held by such Investor
(assuming that such call position was then fully convertible or exercisable,
notwithstanding any provisions to the contrary, and giving effect to any
conversion or exercise price adjustments scheduled to take effect in the future)
shall be deemed to be held long by such Investor. For purposes of this Section
7.17, the term "Investor" includes an Investor and its Affiliates and Related
Parties.
7.18 PAYMENTS FOR CONSENT
Neither Obligor nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Agreement, the Noteholders Agreement, the Director Agreement or the Notes unless
such consideration is offered to be paid and is paid to all Holders of the Notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
7.19. HART-SCOTT-RODINO
(a) The Parties shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings (which
shall include any necessary filings under the HSR Act and under the competition
laws of any other jurisdiction), and to obtain as promptly as practicable all
permits, consents, approvals and authorizations of all third parties and
Governmental Entities which are necessary or advisable to consummate the
transactions contemplated by this Agreement. The Parties agree that they will
consult with each other with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and the other Transaction Documents and each Party will keep the other
apprised of the status of significant matters relating to contemplation of the
transactions contemplated hereby and thereby.
(b) Each of the Parties shall use its reasonable best efforts to
resolve objections, if any, which may be asserted with respect to the
transactions contemplated hereby and by the other Transaction Documents under
antitrust laws, including, if applicable, the HSR Act. In the event a suit is
threatened or instituted challenging any of the transactions contemplated hereby
and thereby as violative of antitrust laws, each of the Parties shall use its
reasonable best efforts to avoid the filing of, or resist or resolve such suit.
The Parties shall use their reasonable best efforts to take such action as may
be required by: (a) the DOJ or the FTC in order to resolve such objections as
either of them may have to such transaction under antitrust laws, or (b) any
federal or state court of the United States, in any suit brought by a private
party or Governmental Entity challenging such transactions as violative of
antitrust laws, in order to avoid the entry of, or to effect the dissolution of,
any injunction, temporary restraining
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order, or other order which has the effect of preventing the consummation of
such transactions. Reasonable best efforts shall not include the willingness of
an Obligor to accept an order (1) agreeing to the divestiture, or the holding
separate, of any assets of Holdings or its Subsidiaries or (2) restricting the
conduct of the Obligors in a manner that Holdings reasonably determines to be
material to Holdings and its Subsidiaries, taken as a whole.
7.20. PLEDGES OF SECURITIES
The Obligors acknowledge and agree that a Holder may from time to
time pledge pursuant to a bona fide margin agreement or grant a security
interest in some or all of the Securities and, if required under the terms of
such arrangement, such Holder may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer shall not be subject to
approval of either of the Obligors, and no legal opinion of the pledgee, secured
party or pledgor shall be required in connection therewith except as required by
applicable law. Further, no notice shall be required of such pledge. At the
appropriate Holder's expense, the Obligors will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities,
including the preparation and filing of any required prospectus supplement under
Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of selling stockholders
thereunder.
7.21. SECURITIES LAW DISCLOSURE; PUBLICITY
The Obligors shall, within one Business Day after each of the date
hereof and the Closing Date, file a Current Report on Form 8-K disclosing
material terms of the transactions contemplated hereby. After the date hereof,
the Obligors shall timely file any filings and notices required by the SEC or
applicable law with respect to the transactions contemplated hereby. Neither of
the Obligors nor any Person acting on its behalf will provide any Holder (other
than in connection with service by a designee of such Holder as a director or
board observer under the Director Agreement or the Noteholders Agreement) with
material, nonpublic information about the Obligors unless such Holder consents
to receive such information in writing in advance even if otherwise required
pursuant to the terms of any Transaction Document.
7.22. REIMBURSEMENT
Each of the Obligors, jointly and severally, shall indemnify and
hold harmless each Holder and any of its Affiliates or Related Parties from and
against any and all losses, claims, damages, liabilities, settlement costs and
expenses, including costs of preparation of legal action and reasonable
attorneys' fees, as incurred, arising out of or relating to any breach by either
of the Obligors of any of the representations, warranties or covenants made by
either of the Obligors in this Agreement or any other Transaction Document, or
any allegation by a third party that, if true, would constitute such a breach.
The indemnification obligations of the Obligors under this Section 7.23 shall be
in addition to any liability that they may otherwise have and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Holders and any such Related Parties. In no event shall
the liability of either of the Obligors under this Section 7.23 to a Holder or
its Related Parties exceed the total Initial Value paid by the Holder under this
Agreement. If either of the Obligors breaches its obligations under this
Agreement or any Transaction Document, then, in addition to any other
liabilities either of the Obligors may have under this Agreement or any
Transaction Document or applicable law, the Obligors shall pay or reimburse the
Holders on demand for all costs of collection and enforcement (including
reasonable attorney's fees and expenses). Without limiting the generality of the
foregoing, each of the Obligors specifically agrees to reimburse the Holders on
demand for all costs of enforcing the indemnification obligations in this
Section 7.23. The rights of the Holders under this paragraph do not transfer
automatically upon transfer of the Notes, and may be transferred only by an
Investor delivering a written notice to such effect to the Obligors at or prior
to the transfer.
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7.23. AVOIDANCE OF CONFLICTS
The Parties agree that notwithstanding anything else to the contrary
set forth herein, the covenants set forth in Sections 7.5 and 7.7 hereof shall
not restrict Holdings from complying with its letter agreement with BayStar
Group included in the Concurrent Financing Transactions.
8. DEFAULTS AND REMEDIES
8.1. EVENTS OF DEFAULT
An "Event of Default" occurs if:
(a) the Obligors default in the payment when due of interest on
the Notes and such default continues for a period of 30 days;
(b) the Obligors default in the payment when due of principal of
or premium, if any, on the Notes when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to purchase) or
otherwise;
(c) the Obligors default in the performance, or breach the
provisions of Section 7.16 hereof, the Obligors fail to make or consummate a
Change of Control Offer in accordance with the provisions of Section 7.12 hereof
or the Obligors fail to make or consummate an Asset Sale Offer in accordance
with the provisions of Section 7.8 hereof;
(d) an Obligor or any of its Subsidiaries fails to observe or
perform any other covenant or other agreement in this Agreement, the Notes or
either of the Security Agreements for 60 days after notice to such Obligor by
the Holders of at least 25% in aggregate principal amount at maturity of the
Notes then outstanding;
(e) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by an Obligor or any of its Material
Subsidiaries (or the payment of which is guaranteed by an Obligor or any of its
Material Subsidiaries), whether such Indebtedness or guarantee now exists or is
created after the date hereof, which default results in the acceleration of such
Indebtedness prior to its Stated Maturity or is caused by a failure to pay
principal of, or interest or premium, if any, on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of such
default (a "Payment Default") and, in each case, the principal amount of such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10,000,000 or more;
(f) a final nonappealable judgment or final nonappealable
judgments for the payment of money are entered by a court or courts of competent
jurisdiction against an Obligor or any of its Material Subsidiaries and such
judgment or judgments remain undischarged for a period (during which execution
shall not be effectively stayed) of 60 days, provided that the aggregate of all
such undischarged judgments exceeds $10,000,000 (net of any amounts with respect
to which a reputable and creditworthy insurance company has acknowledged
liability in writing); or a final nonappealable judgment or final nonappealable
judgments for the payment of money or for the rescission of the sale of
securities of either of the Obligors are entered by a court or courts of
competent jurisdiction against either of the Obligors, or either of the Obligors
enters into a settlement arrangement that includes the redemption, repurchase or
cancellation of any securities of either of the Obligors, in either case with
respect to an action filed by a security holder of either of the Obligors (other
than a Holder of Notes in its capacity as such) alleging that such Obligor
violated Section 5 of the Securities Act in connection with the offering and
sale of the Notes hereunder or the offering and sale of any of the Concurrent
Financing Transactions Issuances;
(g) an Obligor or any of its Significant Subsidiaries or any
group of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law:
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(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against
it in an involuntary case,
(iii) consents to the appointment of a custodian of it or
for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally can not pay its debts as they become due;
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against an Obligor or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary in an involuntary
case;
(ii) appoints a custodian of an Obligor or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of an Obligor or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of an Obligor or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days;
(i) an Obligor or Material Subsidiary shall breach any material
representation, warranty or agreement set forth in either of the Security
Agreements or shall repudiate any of its obligations under either of the
Security Agreements, or either of the Security Agreements shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect; or
(j) any Agreement Guarantee shall be held in a judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect (except pursuant to its terms), or any Subsidiary
Guarantor shall deny or disaffirm its obligations under its Agreement Guarantee.
The Obligors shall deliver written notice to the Holders within five
days after any Officer of either Obligor has knowledge of the occurrence of any
event that with the giving of notice or the lapse of time or both would become
an Event of Default under this Section 8.1.
8.2. ACCELERATION
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 8.1 hereof with respect to an Obligor, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary) occurs and is continuing, the
Holders of at least 25% in principal amount at maturity of the then outstanding
Notes may declare all the Notes to be due and payable immediately. Upon any such
declaration, the Accreted Value of the Notes, together with any premium and
accrued interest thereon, shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (g) or
(h) of Section 8.1 hereof occurs with respect to an Obligor, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary or any Material Subsidiary thereof,
the Accreted Value of all outstanding Notes, together with any premium and
accrued interest thereon, shall be due and payable immediately without further
action or notice. The Majority Holders may on behalf of all of the Holders
rescind an acceleration and its consequences if the rescission would not
conflict with
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any judgment or decree and if all existing Events of Default (except nonpayment
of Accreted Value, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
8.3. OTHER REMEDIES
If an Event of Default occurs and is continuing, the Holder may
pursue any available remedy to collect the payment of the Accreted Value of, and
any premium or accrued interest on, the Notes or to enforce the performance of
any provision of the Notes, this Agreement, the Agreement Guarantees and the
Security Agreements (subject to the Intercreditor Agreements).
A Holder may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by any Holder of a Note in exercising any right or remedy accruing upon
an Event of Default shall not impair the right or remedy or constitute a waiver
of or acquiescence in the Event of Default. All remedies are cumulative to the
extent permitted by law.
8.4. WAIVER OF PAST DEFAULTS
The Majority Holders may on behalf of the Holders of all of the
Notes waive an existing Default or Event of Default and its consequences
hereunder, except a continuing Default or Event of Default in the payment of the
Accreted Value of, or any premium or accrued interest on, the Notes (including
in connection with an offer to purchase), provided, however, that the Majority
Holders may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration. Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Agreement; but no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
8.5. CONTROL BY MAJORITY
The Majority Holders may direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Holders or
exercising any trust or power conferred on them.
8.6. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT
Notwithstanding any other provision of this Agreement, the right of
any Holder of a Note to receive payment of Accreted Value of, and any premium or
accrued interest on, the Note on the Stated Maturity expressed in the Note or
this Agreement (including in connection with an offer to purchase), or to bring
suit for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of such Holder; provided
that a Holder shall not have the right to institute any such suit for the
enforcement of payment if and to the extent that the institution or prosecution
thereof or the entry of judgment therein would, under applicable law, result in
the surrender, impairment, waiver or loss of the Lien of this Agreement upon any
property subject to such Lien.
9. CONVERSION PROVISIONS
9.1. CONVERSION AT OPTION OF HOLDERS
Each Holder shall have the right, at its option, at any time,
subject to the terms and provisions of this Agreement, as applicable, to Convert
the Accreted Value of each of its Notes or any portion thereof held by such
Holder (together with interest accrued and any premium on such Note or portion
thereof to be Converted) into shares of Conversion Stock at the Conversion
Price, promptly after surrender of such Note, accompanied by written notice of
Conversion (with respect to such Conversion, a "Conversion Notice") specifying
the Accreted Value thereof to be Converted (together with such interest and
premium) duly executed, to Holdings at any time during
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usual business hours at the office of Holdings at, and, if so required by
Holdings, accompanied by a written instrument or instruments of transfer in form
satisfactory to Holdings, duly executed by such Holder or its attorney duly
authorized in writing. Notwithstanding the foregoing, no Holder may Convert the
Accreted Value of its Notes or any portion thereof held by such Holder (together
with interest accrued and any premium on such Note or portion thereof to be
Converted) if such proposed Conversion would constitute or result in an
assignment of any FCC license of the FCC License Subsidiary or any change of
control (whether de jure or de facto) of the FCC License Subsidiary or the
exercise of any voting rights relating to the stock of the FCC License
Subsidiary or the Company if such assignment or change of control or exercise of
voting rights would require, under then existing law, the prior approval of the
FCC, without first obtaining such prior approval of the FCC. Notwithstanding any
other provision of this Agreement or the Notes, if a Conversion of a Note is to
be made in connection with a sale of Holdings or other event, such Conversion
may, at the election of any Holder tendering such Note for Conversion, be
expressly conditioned upon the consummation of such other event, in which case
such conversion shall not be deemed to be effective until the consummation or
occurrence of such other event. The date on which a Conversion Notice is
delivered to Holdings (as determined in accordance with Section 17 hereof) shall
be the "Conversion Date" with respect thereto. Subject to Section 9.7(b) hereof,
but not withstanding any other provision of this Agreement or the Notes, a
Holder may Convert its Notes into Class A Common Stock only to the extent shares
of Class A Common Stock have been reserved by Holdings for issuance upon such
Conversion.
9.2. CONVERSION AT OPTION OF OBLIGORS
The Obligors may, at any time on or after the fourth anniversary of
the Closing Date, require the Holders to Convert the Accreted Value of all, but
not less than all, of the Notes (together with any premium and accrued interest
thereon) into shares of Conversion Stock at the Conversion Price if each of the
following conditions is met:
(a) shares of the Class A Common Stock shall have traded on the
Nasdaq National Market or a national securities exchange during each of the 30
Trading Days immediately preceding the Determination Date (as defined below);
(b) on each of the 30 Trading Days immediately prior to the
Determination Date, shares of Class A Common Stock shall have traded at a price
in excess of 200% of the Conversion Price then in effect;
(c) Holdings shall have reported earnings before interest income
and expense, other income, taxes, depreciation (including amounts related to
research and development) and amortization greater than $0 for the immediately
preceding quarterly period for which Holdings reports its financial results, as
set forth in consolidated financial statements contained in Holdings' SEC
reports for such quarterly period, which financial statements shall have been
reviewed (or audited in the case of an annual report) by the certified
independent accountants of Holdings;
(d) immediately following such Conversion, the aggregate amount
of Indebtedness of Holdings and its Subsidiaries on a consolidated basis shall
be less than $250,000,000; and
(e) no shares of Series C Preferred Stock shall remain
outstanding.
The Obligors may require a Conversion pursuant to this Section 9.2 by delivering
irrevocable written notice of such election to the Holders (with respect to such
Conversion, such notice is referred to herein as a "Conversion Notice" and the
date on which the Conversion Notice is sent is referred to herein as the
"Determination Date"), and the fifth Trading Day after the date any such
Conversion Notice is delivered to the Holders (as determined in accordance with
Section 17 hereof) will be the "Conversion Date" for such required Conversion.
Promptly upon receipt of a Conversion Notice pursuant to this Section 9.2, each
Holder shall surrender its Note or Notes to Holdings at a time during usual
business hours at the office of Holdings, and, if so required by Holdings,
accompanied by a written instrument or instruments of transfer in form
satisfactory to Holdings, duly executed by such Holder or its attorney duly
authorized in writing.
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9.3. ISSUANCE OF CERTIFICATES
Holdings and the Holder surrendering a Note for Conversion, in whole
or in part, in a transaction that would be reportable under the HSR Act or that
would require approval by any Governmental Entity, shall promptly make all
filings which may be required in connection with such Conversion under the HSR
Act and other applicable laws, rules or regulations. Holdings and any such
Holder shall provide each other with such necessary information and assistance
as may reasonably be requested in connection with such filings. As promptly as
practicable after the surrender of a Note for Conversion (or, if applicable, the
specified waiting period under the HSR Act and receipt of other required
approvals from Governmental Entities), as provided in Section 9.1 or 9.2 hereof
(but in no event later than three Trading Days after such surrender, in the
absence of any HSR waiting period or other required approvals from Governmental
Entities), Holdings at its expense shall deliver or cause to be delivered at its
principal office to or upon the written order of the Holder of such Note so
surrendered (a) certificates bearing, if required by the terms hereof, the
restrictive legends set forth in Section 6 hereof, representing the number of
fully paid and non-assessable shares of Conversion Stock into which such Note is
being Converted in accordance with the provisions hereof, and (b) a Note,
registered in the name of such Holder, representing the portion of the principal
amount, if any, of the surrendered Note that is not attributable to the Accreted
Value being Converted at such time, dated so that there will be no loss of
interest on such principal amount and otherwise of like tenor. Subject to the
following provisions of this Section 9.3, such Conversion shall be deemed to
have been made at the close of business on the Conversion Date (or, if
applicable, the expiration of the specified waiting period under the HSR Act),
so that (i) the rights of the Holder of such Note as a Holder shall cease at
such time with respect to the Accreted Value being Converted, (ii) there shall
be no loss of interest on the portion of the principal amount of any surrendered
Note that is not attributable to the Accreted Value being Converted and (iii)
the Person entitled to receive the shares of Conversion Stock upon Conversion of
such Note shall be treated for all purposes as having become the record holder
or holders of such shares of Conversion Stock at such time; provided, however,
that no such surrender on any date when the stock transfer books of Holdings
shall be closed shall be effective to constitute the Person entitled to receive
the shares of Conversion Stock upon such Conversion as the record Holder of such
shares of Conversion Stock on such date, but such surrender shall be effective
to constitute the Person entitled to receive such shares of Conversion Stock as
the record Holder thereof for all purposes at the close of business on the next
succeeding day on which such stock transfer books are open.
9.4. NO FRACTIONAL SHARES
If, but for the provisions of this Section 9.4, the Conversion of
any Note for Conversion Stock were to result in the issuance by Holdings of a
fraction of a share of Class A Common Stock, Holdings, at its option, shall
either (a) round up such fraction to the nearest whole share, or (b) pay an
amount in cash equal to the product of (i) such fraction, multiplied by (ii) the
Fair Market Value of a share of Class A Common Stock on the date of the
Conversion notice, computed to the nearest whole cent, in lieu of issuing a
fractional share.
9.5. MERGER OF HOLDINGS
In case of any consolidation with or merger of Holdings with another
corporation, or in case of any sale, lease or conveyance to another corporation
of the property of Holdings as an entirety or substantially as an entirety, a
Holder shall have the right thereafter to exchange any Notes for the kind and
amount of shares of stock and other securities and property or cash receivable
upon such consolidation, merger, sale, lease or conveyance by a Holder of the
number of shares of Conversion Stock of Holdings into which such Note might have
been converted immediately prior to such consolidation, merger, sale, lease or
conveyance. Holdings shall not effect any such consolidation, merger, sale,
lease or conveyance unless prior to or simultaneously with the consummation
thereof the successor corporation (if other than Holdings) resulting from such
consolidation or merger or the corporation purchasing or otherwise acquiring
such property shall assume, by written instrument executed and mailed or
delivered to the Holders at the last address of such Holders appearing on the
books of Holdings, the obligation to deliver to such Holders such securities,
property or cash as, in accordance with the foregoing provisions, such Holders
may be entitled to acquire upon Conversion.
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9.6. RECLASSIFICATION OF CLASS A COMMON STOCK
In case of any reclassification, stock split, subdivision, dividend
or distribution payable in shares of Class A Common Stock (or other securities
or rights convertible into, or entitling the holder thereof to receive directly
or indirectly shares of Class A Common Stock), or similar recapitalization or
event with respect to shares of Class A Common Stock (other than a change in par
value, or from par value to no par value, but including any change in the shares
of Class A Common Stock into two or more classes or series of shares) or in case
of any consolidation or merger of another corporation into Holdings in which
Holdings is the surviving corporation and in which there is a reclassification
or change of the shares of Class A Common Stock (other than a change in par
value, or from par value to no par value, but including any change in the shares
of Class A Common Stock into two or more classes or series of shares), Holdings
shall provide that the Holders shall have the right thereafter to Convert the
Notes into the kind and amount of shares of stock and other securities and
property or cash receivable upon such reclassification or similar
recapitalization or event or such consolidation or merger ("Reclassified
Securities") by a holder of the number of shares of Class A Common Stock into
which the Notes might have been Converted immediately prior to such
reclassification or similar recapitalization or event of such consolidation or
merger. The above provisions hereof shall similarly apply to successive
reclassifications and changes of shares of Class A Common Stock and to
successive consolidations, mergers, sales or conveyances involving such
reclassifications and changes of shares of Class A Common Stock. Holdings shall
not effect any such consolidation, merger, sale, transfer or other disposition,
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than Holdings) resulting from such consolidation or merger
or the corporation purchasing or otherwise acquiring such properties shall
assume, by written instrument executed and mailed or delivered to the Holders at
the last address of such Holders appearing on the books of Holdings, the
obligation to deliver to such Holders such Reclassified Securities as, in
accordance with the foregoing provisions, such Holders may be entitled to
acquire. The above provisions of this subparagraph shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales,
transfers, or other dispositions.
9.7. RESERVATION OF CLASS A COMMON STOCK
(a) Holdings shall have reserved 40,000,000 shares of Class A
Common Stock for issuance as Conversion Stock as of the Closing, which will be
sufficient to allow $127,200,000 in Initial Value of Notes to be Converted, less
the number of shares needed (if any) under the letter agreement between Holdings
and BayStar Group. Holdings will seek shareholder approval at its next
shareholders meeting to amend its certificate of incorporation to increase the
number of shares of its authorized Class A Common Stock to 600,000,000. Holdings
covenants that it will, immediately following receipt of such shareholder
approval, reserve and keep available out of its authorized Class A Common Stock,
a sufficient number of shares for the purposes of issuance upon Conversion of
all or any portion of such Notes which the Holders may Convert as provided in
Section 9.2 herein. Such shareholders meeting shall in any event be held within
six months after the Closing Date. Holdings covenants that all shares of Class A
Common Stock which shall be so issuable shall be duly and validly issued and
fully paid and non-assessable, free from preemptive or similar rights on the
part of the holders of any shares of Capital Stock or securities of Holdings,
and free from all Liens or other charges with respect to the issuance thereof.
Holdings will take all such action as may be necessary to assure that such
shares of Class A Common Stock are approved for listing on the Nasdaq Stock
Market (subject to notice of issuance) and generally may be so issued without
violation by the Company 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.
(b) If, at the time any Holder requests a Conversion of any of
the Notes in compliance with Section 9.1, and Holdings does not have available a
sufficient number of authorized but unissued shares of Class A Common Stock to
effect such Conversion, within three Business Days after such notice, (i)
Holdings shall issue such number of shares of Class A Common Stock as it has
available and (ii) the Obligors shall pay to such Holder in cash, as liquidated
damages and not as a penalty, an amount equal to (A) the number of shares of
Class A Common Stock to have been issued upon such Conversion in excess of the
number of shares of Class A Common Stock actually issued upon such Conversion,
multiplied by the Fair Market Value per share of Class A Common Stock on the
date of such notice. Upon complying with the foregoing requirements, Holdings
shall have no further obligation
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to issue or deliver the shares of Class A Common Stock to have been issued upon
such Conversion, or to take any other actions specified in Section 9 relating to
such Conversion.
9.8. TAXES
The issuance of certificates for shares of Conversion Stock upon the
Conversion of any Note shall be made without charge to the Holder for any Tax in
respect of the issuance of such certificates, and such certificates shall be
issued in the name of, or in such name as may be directed by, the Holder of such
Note; provided, however, that Holdings shall not be required to pay any Tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate in a name other than that of the Holder of such
Note, and Holdings shall not be required to issue or deliver such certificates
unless or until the Person or Persons requiring the issuance thereof shall have
paid to Holdings the amount of such Tax or shall have established to the
satisfaction of Holdings that such Tax has been paid. The Holder shall be
responsible for the payment of all applicable income Taxes in connection with
the Conversion of a Note.
9.9. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS
No Note shall entitle any Holder thereof to any of the rights of a
stockholder of Holdings. No provision of this Agreement or of any Note, in the
absence of the actual Conversion of such Note or any part thereof by the Holder
thereof into Conversion Stock issuable upon such Conversion shall give rise to
any liability on the part of such Holder as a stockholder of Holdings, whether
such liability shall be asserted by Holdings or by creditors of Holdings.
9.10. LIMITATION ON CONVERSION
Notwithstanding the provisions of Section 9.1 hereof, the number of
shares of Class A Common Stock that may be acquired by a Holder upon any
Conversion of Notes shall be limited to the extent necessary to ensure that,
following such exercise, the total number of shares of Class A Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons whose
beneficial ownership of Class A Common Stock would be aggregated with the
Holder's for purposes of Section 13(d) of the Exchange Act, does not exceed
4.999% (the "Limiting Percentage") of the total number of issued and outstanding
shares of Class A Common Stock (including for such purpose the shares of Class A
Common Stock issuable upon such Conversion). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations thereunder. Each delivery of a Conversion
Notice hereunder will constitute a representation by the Holder that it has
evaluated the limitation set forth in this Section 9.10 and determined that
issuance of the full number of shares of Class A Common Stock requested in such
Conversion Notice is permitted under this Section 9.10. Holdings' obligation to
issue shares of Class A Common Stock in excess of the limitation referred to in
this Section 9.10 shall be suspended (and shall not terminate or expire
notwithstanding any contrary provisions hereof) until such time, if any, as such
shares of Class A Common Stock may be issued in compliance with such limitation.
By written notice to the Obligors at any time on or after the date hereof, a
Holder may waive the provisions of this Section 9.10 or increase or decrease
such limitation percentage to any other percentage specified in such notice, but
not exceeding 9.999%. Any such waiver or increase will not be effective until
the sixty-first day after such notice is delivered to the Obligors, provided,
that any such waiver or increase delivered prior to or at the Closing will take
effect as of the Closing. Any such waiver, increase or decrease will apply only
to such Holder and not to any other Holder. Notwithstanding the foregoing, an
Investor may elect to have the limitations of this Section 9.10 in their
entirety not apply to such Investor and its subsequent transferees at any and
all times by delivering, or causing to be delivered, a written notice to such
effect to the Obligors at or prior to the Closing.
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10. REGISTRATION, TRANSFER AND SUBSTITUTION OF NOTES
10.1. NOTE REGISTER
The Obligors will keep at their principal office a register in which
the Obligors will provide for the registration of the Notes and the registration
of transfers of the Notes. The Obligors may treat the Person in whose name the
Note is registered on such register as the owner and holder thereof (the
"Holder") for the purpose of receiving payment of the principal of and interest
on the Note and for all other purposes, whether or not the Note shall be
overdue, and the Obligors shall not be affected by any notice to the contrary.
The Obligors will provide the Collateral Agent with a copy of their Note
register semi-annually on each June 15 and December 15, or at any other time
upon the written request of the Collateral Agent.
10.2. TRANSFER AND CONVERSION OF NOTES
Upon surrender of one or more Notes for registration of transfer or
for exchange to the Obligors at their principal office with evidence that all
applicable transfer taxes have been paid, the Obligors at their expense will
execute and deliver in exchange therefore one or more Notes in the aggregate
unpaid principal amount(s) of such surrendered Note(s). Each such new Note shall
be registered in the name of such Person, or its nominee, as such Holder or
transferee may request, dated so that there will be no loss of interest on such
surrendered Note and otherwise of like tenor.
10.3. REPLACEMENT OF NOTES
Upon receipt of evidence reasonably satisfactory to the Obligors of
the loss, theft, destruction or mutilation of a Note and, in the case of any
such loss, theft or destruction, upon delivery of an indemnity bond in such
reasonable amount and form as the Obligors may determine (or of an indemnity
agreement from the Holder reasonably satisfactory to the Obligors), or, in the
case of any such mutilation, upon the surrender of such Holder for cancellation
to the Company at its principal office, the Obligors at their expense will
execute and deliver, in lieu thereof, a new Note of like tenor, dated so that
there will be no loss of interest on such lost, stolen, destroyed or mutilated
Note. Any Note in lieu of which any such new Note has been so executed and
delivered by the Obligors shall not be deemed to be an outstanding Note for any
purpose of this Agreement.
11. GUARANTEES
11.1. EXECUTION AND DELIVERY OF AGREEMENT GUARANTEES
The Obligors shall cause XM Leasing Subsidiary to execute and
deliver at the Closing to each Holder of a Note an Agreement Guarantee
substantially in the form included in Exhibit F hereto, duly executed on behalf
of XM Leasing Subsidiary by an Officer thereof. The Obligors shall further cause
any Person that becomes, as a result of its acquisition by an Obligor or by a
Subsidiary of an Obligor or otherwise, a Material Subsidiary at any time after
the Closing Date to execute and deliver reasonably promptly after such event to
each Holder of a then outstanding Note an Agreement Guarantee substantially in
the form included in Exhibit F hereto, duly executed on behalf of such Material
Subsidiary by an Officer thereof. Notwithstanding the foregoing and subject to
the provisions set forth in the succeeding paragraph, the Obligors shall cause:
(a) XM Capital Subsidiary to execute and deliver an Agreement
Guarantee only in the event that XM Capital Subsidiary continues to constitute a
Material Subsidiary on the date six months after the Closing Date or becomes a
Material Subsidiary as of any date thereafter;
(b) XM Building Subsidiary to execute and deliver an Agreement
Guarantee only as of the date, if any, as of which (i) XM Building Subsidiary
becomes a Material Subsidiary and the existing mortgage on the real property
located at 1500 Eckington Place, NE, Washington, DC and related improvements (or
any successor
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mortgage) shall not, in the reasonable opinion of the Obligors, prohibit the
grant to the Noteholders of a security interest in the Capital Stock or assets
of XM Building Subsidiary or (ii) XM Building Subsidiary constitutes a Material
Subsidiary without giving effect to its ownership of the real property located
at 1500 Eckington Place, NE, Washington, DC and related improvements; and
(c) FCC License Subsidiary to execute and deliver an Agreement
Guarantee only in the event that FCC License Subsidiary constitutes a Material
Subsidiary without giving effect to its ownership of the FCC licenses used in
the transmission of the XM Radio Service.
In addition:
(A) Promptly after completing preparation of its consolidated
financial statements for each fiscal quarter ending after the Closing Date,
Holdings shall calculate, as of the final day of such fiscal quarter and in
accordance with GAAP, the aggregate book value of the assets of all of its
Subsidiaries excluding the value of the capital stock of the Subsidiaries,
excluding (i) all assets of the Company, (ii) all assets of any Subsidiary
Guarantors, (iii) the FCC licenses of FCC License Subsidiary used in the
transmission of the XM Radio Service, (iv) the real property of XM Building
Subsidiary located at 1500 Eckington Place, NE, Washington, DC and related
improvements and (v) all assets of XM Capital Subsidiary, but only with respect
to a fiscal quarter commencing on or after July 1, 2003 and only to the extent
it is not a Subsidiary Guarantor as of such final day of such fiscal quarter. If
the amount of such aggregate book value exceeds $10,000,000, Holdings shall
cause one or more of its Subsidiaries to become additional Subsidiary Guarantors
so that the aggregate book value of the assets of all of the Subsidiaries of
Holdings, excluding assets described in the preceding clauses (i) through (v)
(except to the extent such assets are owned by such additional Subsidiary
Guarantors) as of such final day of such fiscal quarter shall be less than
$10,000,000. Any such additional Subsidiary Guarantor will also constitute a
Material Subsidiary.
(B) If at any time a Subsidiary of either Obligor (other than a
Subsidiary that has executed and delivered an Agreement Guarantee) Guarantees
any Pari Passu Indebtedness, the Obligors shall cause such Subsidiary to become
a Subsidiary Guarantor.
11.2. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS
(a) Nothing contained in this Agreement, in any Agreement
Guarantee or in the Notes shall prevent any consolidation or merger of a
Subsidiary Guarantor with or into an Obligor or another Subsidiary Guarantor, or
shall prevent the transfer of all or substantially all of the assets of a
Subsidiary Guarantor to an Obligor or another Subsidiary Guarantor. Upon any
such consolidation, merger, transfer or sale, the Agreement Guarantee of the
Subsidiary Guarantor being consolidated or merged or into an Obligor or such
other Subsidiary Guarantor (or the assets of which are being so transferred)
shall no longer have any force or effect.
(b) Nothing contained in this Agreement or in any of the Notes
shall prevent any consolidation or merger of a Subsidiary Guarantor with or into
a corporation or corporations other than an Obligor or another Subsidiary
Guarantor (whether or not affiliated with the Subsidiary Guarantor), or
successive consolidations or mergers in which a Subsidiary Guarantor or its
successor or successors shall be a party or parties, or shall prevent the
transfer of all or substantially all of the assets of a Subsidiary Guarantor, to
a corporation other than an Obligor or another Subsidiary Guarantor (whether or
not affiliated with the Subsidiary Guarantor) authorized to acquire and operate
the same in the event that such consolidation, merger or transfer complies with
the terms and conditions of this Agreement, the Notes, the Noteholders Agreement
and any Agreement Guarantee.
11.3. RELEASES FOLLOWING SALE OF ASSETS
Concurrently with any sale or other disposition of all or
substantially all of the assets of any Subsidiary Guarantor or all of the
Capital Stock of any Subsidiary Guarantor, in each case, in compliance with the
terms hereof, then such Subsidiary Guarantor (in the event of a sale or other
disposition of all of the Capital Stock of such Subsidiary Guarantor) or the
corporation acquiring the property (in the event of a sale or other disposition
of all or substantially all of the assets of a Subsidiary Guarantor) shall be
released from and relieved of its obligations
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under its Agreement Guarantee and this Section 11, as the case may be; provided
that in the event of an Asset Sale, the Net Proceeds from such sale or other
disposition are treated in accordance with the provisions of Section 7.8 hereof.
Any Subsidiary Guarantor not released from its obligations under its Agreement
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Subsidiary Guarantor under the
Agreement Guarantee as provided in this Section 11.
11.4. APPLICATION OF CERTAIN TERMS AND PROVISIONS TO HOLDINGS AND THE
SUBSIDIARY GUARANTORS
(a) For purposes of any provision of this Agreement that provides
for the delivery by any Subsidiary Guarantor of an Officers' Certificate, the
definitions of such terms in Section 1 shall apply to such Subsidiary Guarantor,
as if references therein to the Company were references to such Subsidiary
Guarantor.
(b) Any notice or demand which by any provision of this Agreement
is required or permitted to be given or served by the Holders of Notes to or on
any Subsidiary Guarantor may be given or served as described in this Agreement
as if references therein to the Obligors were references to such Subsidiary
Guarantor.
12. SECURITY AGREEMENTS
12.1. SECURITY AGREEMENTS
The due and punctual payment of the Accreted Value of, and any
premium and interest on, the Notes when and as the same shall be due and
payable, whether on an Interest Payment Date, at maturity, by acceleration,
repurchase, redemption or otherwise, and interest on the overdue principal of
and interest on the Notes and performance of all other obligations of the
Obligors to the Holders of Notes under this Agreement and the Notes, according
to the terms hereunder or thereunder, shall be secured as provided in the
Security Agreements. The Company shall enter into at the Closing the FCC License
Subsidiary Pledge Agreement. The Obligors shall, and shall cause XM Leasing
Subsidiary to enter into at the Closing, and any other Subsidiary Guarantor to
enter into concurrently with the execution and delivery of an Agreement
Guarantee by such Subsidiary Guarantor, the General Security Agreement, the form
of which is attached as Exhibit B hereto.
Each Holder of Notes, by its acceptance thereof, consents and agrees
to the terms of the Security Agreements and the Intercreditor Agreements
(including the provisions providing for foreclosure and release of Collateral)
as the same may be in effect or may be amended from time to time in accordance
with their terms and authorizes and directs the Collateral Agent named in the
Intercreditor Agreements to enter into the Security Agreements and to perform
its obligations and exercise its rights thereunder in accordance therewith. The
Obligors shall do or cause to be done all such acts and things as may be
required by the provisions of the Security Agreements, to assure and confirm to
the Holders and the Collateral Agent the security interest in the Collateral
contemplated hereby, by the Security Agreements or any part thereof, as from
time to time constituted, so as to render the same available for the security
and benefit of this Agreement and of the Notes secured hereby, according to the
intent and purposes herein and therein expressed.
12.2. RELEASE OF COLLATERAL
(a) Collateral may be released only in accordance with the terms
of the Security Agreements and the Intercreditor Agreements.
(b) At any time when a Default or Event of Default shall have
occurred and be continuing and the maturity of the Notes shall have been
accelerated (whether by declaration or otherwise) and the Holders shall have
delivered a notice of acceleration to the Collateral Agent, no release of
Collateral pursuant to the provisions of the Security Agreements shall be
effective as against the Holders of Notes.
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(c) The release of any Collateral from the terms of this
Agreement and the Security Agreements shall not be deemed to impair the security
under this Agreement in contravention of the provisions hereof if and to the
extent the Collateral is released pursuant to the terms of the Security
Agreements.
13. CONDITIONS TO CLOSING
13.1 CONDITIONS TO OBLIGATIONS OF THE INVESTORS
The obligation of each of the Investors to acquire Notes at the
Closing is subject to the fulfillment on or prior to the Closing of the
following conditions:
(a) The representations and warranties made by the Obligors in
Section 4 hereof shall be true and correct in all material respects when made,
and shall be true and correct in all material respects at the Closing Date with
the same force and effect as if they had been made on and as of said date
(unless any representation or warranty refers to a specific earlier date, in
which case it shall have been true and correct in all material respects at such
date).
(b) All covenants, agreements and conditions to be performed by
either of the Obligors or any Subsidiaries of the Obligors on or prior to the
Closing contained in this Agreement and the other Transaction Documents to which
either is a party shall have been performed or complied with in all material
respects.
(c) There shall not then be in effect any legal or other order
enjoining or restraining the transactions contemplated by this Agreement and the
other Transaction Documents.
(d) All waiting periods, if any, under the HSR Act or foreign
merger notification requirements, if applicable, relating to the transactions
contemplated hereby and by the other Transaction Documents will have expired or
been terminated early and all material foreign antitrust approvals required to
be obtained prior to the Closing in connection with the transactions
contemplated hereby and thereby shall have been obtained.
(e) There shall not be in effect any law, rule or regulation
prohibiting or restricting such purchase or requiring any consent or approval of
any Person which shall not have been obtained to issue the Notes (except as
otherwise provided in this Agreement).
(f) At least 90% of the principal amount of the Company's
outstanding 14% Senior Secured Notes due 2010 shall have been exchanged as
contemplated in clause (3) of the definition of Concurrent Financing
Transactions.
(g) The Concurrent Financing Transactions shall close on or prior
to the Closing in the manner contemplated in the agreements governing such
transactions (or, to the extent any such agreement has not been executed as of
the time of delivery of this Agreement, in the manner contemplated in the most
recent draft thereof provided to the Investors prior to the date of this
Agreement) with all of the conditions therein satisfied or waived, provided that
any such waiver shall be reasonably acceptable to the Supermajority Investors.
(h) The Investors shall have received an opinion of counsel to
the Obligors with respect to the legality of the Notes and such other matters as
may be customary for transactions of this type, in form and substance reasonably
satisfactory to the Investors.
(i) Each of the Obligors and any other Person (other than an
Investor) shall have entered into the Transaction Documents to which it is a
party.
(j) The Investors shall have received a completely executed copy
of each of the Transaction Documents to which it is a party.
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(k) The aggregate Initial Value of Notes purchased at the
Closing, together with the gross proceeds to Holdings of the sale of Class A
Common Stock, if any, issued as contemplated by clause (6) of the definition of
Concurrent Financing Transactions (collectively, the "Gross Proceeds"), shall
not be less than $200,000,000.
(l) Since the date hereof, no event or series of events shall
have occurred that reasonably could be expected to have or result in a Material
Adverse Effect. Trading in the Class A Common Stock shall not have been
suspended by the SEC or the Nasdaq National Market (except for any suspension of
trading of not more than one Business Day solely to permit dissemination of
material information regarding the Obligors or a general suspension of trading
on the Nasdaq National Market) at any time since the date hereof, and the Class
A Common Stock shall have been at all times since the date hereof listed for
trading on the Nasdaq National Market.
(m) Each of the Obligors shall have delivered to the Investors an
Officers' Certificate, dated the Closing Date, certifying that the conditions
specified in clauses (a), (b) and (l) of this Section 13.1 have been fulfilled.
Any of the preceding clauses (a), (b), (c), (d), (e), (h), (i), (j)
and (m) may be waived in writing by the Majority Holders to the extent permitted
by law. The written consent of the Supermajority Investors shall be required to
waive the provisions of clauses (f), (g), (k) and (l) above, it being understood
that a waiver of clause (k) shall not be cause for elimination or reduction of
any Investor's obligation to close on its purchase of the aggregate purchase
price as set forth opposite such Investor's name on Attachment 1, nor shall any
such waiver constitute a waiver by the Obligors of any cause of action they
might have against the breaching party, provided, however, that in the event
that the Gross Proceeds would be less than $175,000,000, the provisions of
clause (k) may be waived only by the consent of all Investors.
13.2 CONDITIONS TO THE OBLIGATIONS OF THE OBLIGORS
The obligation of the Obligors to issue the Notes at the Closing is
subject to the fulfillment on or prior to Closing of the following conditions,
each of which may be waived in writing by the Obligors to the extent permitted
by law:
(a) The representations and warranties made by each of the
Investors in Section 5 hereof shall be true and correct in all material respects
when made, and shall be true and correct in all material respects at the Closing
Date with the same force and effect as if they had been made on and as of said
date (unless any representation or warrant refers to a specific earlier date, in
which case it shall have been true and correct in all material respects at such
date).
(b) There shall not then be in effect any legal or other order
enjoining or restraining the transactions contemplated by this Agreement and the
other Transaction Documents.
(c) All waiting periods, if any, under the HSR Act or foreign
merger notification requirements, if applicable, relating to the transactions
contemplated hereby and by the other Transaction Documents will have expired or
been terminated early and all material foreign antitrust approvals required to
be obtained prior to the Closing in connection with the transactions
contemplated hereby and thereby shall have been obtained.
(d) Each of the Investors shall have entered into the Transaction
Documents to which it is a party, except that any Investor that purchased Notes
with an Initial Value less than $10,000,000 shall not be required to sign the
Noteholders Agreement.
(e) The aggregate Initial Value of Notes purchased at the
Closing, together with the gross proceeds to Holdings of the sale of Class A
Common Stock, if any, issued as contemplated by clause (6) of the definition of
Concurrent Financing Transactions, shall not be less than $200,000,000.
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13.3 INVESTMENT ELECTION IN ABSENCE OF CLOSING
In the event the Closing does not occur, whether due to the actions
or omissions of any Party, the failure of satisfaction of closing conditions or
for any other reason whatsoever, then each of the Investors shall have the right
(but not the obligation), during the fifteen-day period following the Business
Day on which the Obligors notify such Investor that the Closing will not occur,
to notify the Obligors of such Investor's election to purchase shares of Class A
Common Stock (subject to applicable securities law and regulatory requirements)
at a per share price equal to the Conversion Price, in the full amount of the
aggregate Initial Value of Notes set forth opposite such Investor's name on
Attachment 1. Notwithstanding the foregoing, if the Closing does not occur due
to a decision by the Board of Directors of the Obligors, acting upon their
fiduciary duties, to sell a majority interest in the Obligors by way of an
acquisition, merger, asset sale or other form of business combination (which
sale shall not be considered a breach of this Agreement), each Investor's right
to purchase shares set forth in this Section 13.3 shall be limited to one-half
of the applicable Initial Value of Notes referenced above at a price per share
equal to the Conversion Price. Such purchase of shares shall be effected within
ten Business Days after the delivery of such notice to the Obligors, on a
Business Day mutually agreed upon by the Obligors and such Investor. Upon the
request of one or more Investors exercising their respective rights under this
Section 13.3, Holdings will enter into registration rights arrangements with
such Investors affording them registration rights regarding the Class A Common
Stock purchased under this Section 13.3 that are, to the extent feasible,
substantially identical to the rights to have been afforded to Holders with
respect to a "Noteholder Shelf Registration" under the Registration Rights
Agreement. Notwithstanding the foregoing, no Investor shall be entitled to
exercise the right provided in this Section 13.3 if such Investor or any of its
Affiliates breached any of its obligations hereunder in connection with the
failed Closing. The provisions of this Section 13.3 are intended to provide for
liquidated damages and not a penalty, and each Investor agrees that (a) if such
Investor exercises its rights under this Section 13.3 and purchases shares of
Class A Common Stock as contemplated hereby, such actions shall serve as such
Investor's sole remedy against the Obligors and their Affiliates with respect to
the failed Closing and (b) if the Closing does not occur and such failure is not
due in whole or in part to an act omission of either of the Obligors, a failure
by either of the Obligors to satisfy its closing conditions or any other default
hereunder by either of the Obligors, the rights of the Investors under this
Section 13.3 constitute the Investors' sole remedy against the Obligors with
respect to such Closing.
14. EXPENSES
The Obligors will pay (a) the reasonable fees and disbursements of
Hale and Dorr LLP, as counsel for the Investors, and (b) the reasonable fees and
disbursements of one additional counsel for each Investor that purchases, at the
Closing, Notes with an Initial Value of at least $50,000,000. All such fees and
disbursements shall be paid by the Obligors even if the transactions
contemplated hereby do not close.
15. SURVIVAL
All express representations and warranties contained in this
Agreement or made in writing by or on behalf of Holdings or its Subsidiaries in
connection with the transactions contemplated by this Agreement shall survive
the execution and delivery of this Agreement, any investigation at any time made
by the Investors or on behalf of the Investors, the issuance of the Notes
hereunder, and any disposition, payment or Conversion of the Notes. All
statements contained in any certificate or other instrument delivered by or on
behalf of Holdings or its Subsidiaries pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed
representations and warranties of Holdings or its Subsidiaries under this
Agreement.
16. AMENDMENTS AND WAIVERS
Except as expressly provided elsewhere herein or in the Notes, any
term of this Agreement or of the Notes may be amended or modified, and the
observance of any term of this Agreement or of the Notes may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only with the written consent of (i) each Obligor and (ii) the Majority Holders.
Any provision of this Agreement or the Notes that
56
<PAGE>
expressly provides for waiver or consent by a specified group or percentage of
the Investors or Holders may be amended or waived only by such specified group
or percentage of the Investors or Holders. Any amendment or waiver effected in
accordance with this Section 16 shall be binding upon each Holder of the Notes,
each future Holder of the Notes and each Obligor. Any consent or waiver obtained
under Section 7.3 of the Noteholders Agreement or Section 4.2 of the Director
Agreement that approves an action not permitted hereunder shall be considered a
waiver of the applicable provision of this Agreement with respect to the matter
as to which the consent or waiver was obtained. Notwithstanding the foregoing,
this Agreement or the Notes may be amended or supplemented, without the consent
of any Holder of a Note, to cure any ambiguity, defect or inconsistency in a
manner that does not materially adversely affect any Holder, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights of any such Holder. Further,
notwithstanding any of the foregoing, without the consent of each Holder
affected, an amendment or waiver under this Section 16 may not, with respect to
any Note held by a non-consenting Holder:
(a) reduce the principal amount at maturity of Notes whose
Holders must consent to an amendment, supplement or waiver;
(b) reduce the Accreted Value or principal amount of, or change
the fixed maturity of, such Note or alter or waive any of the provisions with
respect to the repurchase of such Note pursuant to Sections 7.8 and 7.12 hereof;
(c) reduce the Interest Rate applicable to such Note, reduce the
rate at which the Accreted Value of such Note increases, or change the time for
payment of interest, including default interest, on such Note;
(d) waive a Default or Event of Default in the payment of
interest or premium, if any, on such Note (except a rescission of acceleration
of the Notes by the Majority Holders and a waiver of the payment default that
resulted from such acceleration);
(e) make the principal or Accreted Value of, or interest or
premium on, such Note payable in money or assets other than that stated in this
Agreement or the Notes;
(f) except as expressly provided herein or in the Notes, increase
the Conversion Price applicable to such Note, limit the times at which or
amounts for which such Note may be Converted into Conversion Stock, change the
terms under which the Obligor can require Conversion of such Note, or change the
nature of the consideration to be received upon a Conversion of such Note;
(g) make any change in the provisions of this Agreement relating
to waivers of past Defaults or the rights of the Holder of such Note to receive
payments of principal of or interest or premium, if any, on such Note;
(h) release any portion of the Collateral from the Lien of the
Security Agreements, except in accordance with the terms thereof, including the
provisions of Section 19 of the FCC License Subsidiary Pledge Agreement and
Section 8 of the General Security Agreement; or
(i) make any change in Section 8.6 hereof.
17. NOTICES
Except as otherwise provided in this Agreement, notices and other
communications under this Agreement shall be in writing and shall be deemed
properly served if: (i) mailed by registered or certified mail, return receipt
requested, (ii) delivered by a recognized overnight courier service, (iii)
delivered personally, or (iv) sent by facsimile transmission, addressed to the
General Counsel for each Party at the address set forth below for such Party or
at such other address or to the attention of such other officers as such Party
shall have furnished in writing pursuant to this Section 17. Such notice shall
be deemed to have been received: (i) three (3) days after the date of mailing if
sent by certified or registered mail, (ii) one (1) day after the date of
delivery if sent by overnight
57
<PAGE>
courier, (iii) the date of delivery if personally delivered, or (iv) the next
succeeding business day after transmission by facsimile.
If to Holdings or the Company:
XM SATELLITE RADIO HOLDINGS INC.
1500 Eckington Place, NE
Washington, D.C. 20002-2194
Fax No.: (202) 380-4500
Attention: General Counsel
If to the Investors:
As set forth on Attachment 1 hereto.
18. EXECUTION IN COUNTERPARTS
This Agreement may be executed in any number of counterparts and by
different Parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
19. BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and assigns, except that (a) the
Obligors shall not have the right to assign their respective rights or
obligations hereunder or any interest herein without the prior written consent
of all of the Holders and (b) the Investors may, prior to the Closing and with
the consent of each of the Obligors, assign their rights hereunder to purchase
all or a portion of the Initial Value of Notes set forth in Attachment 1 hereto,
in which case the assignees thereof shall be deemed to be "Investors" with
respect to the assigned Initial Value of Notes.
20. GOVERNING LAW; CHOICE OF FORUM; JURY TRIAL WAIVER
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK AND THE CORPORATE
LAW OF THE STATE OF DELAWARE, AS APPLICABLE, WITHOUT GIVING EFFECT TO ANY
CONFLICT OF LAW PROVISIONS THEREOF OTHER THAN NEW YORK GENERAL OBLIGATIONS LAW
SECTIONS 5-1401 AND 5-1402.
(b) IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE
SOLE FORUM FOR RESOLVING DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT
IS THE SUPREME COURT OF THE STATE OF NEW YORK IN AND FOR THE COUNTY OF NEW YORK
OR THE FEDERAL COURTS LOCATED IN SUCH STATE AND COUNTY, AND RELATED APPELLATE
COURTS. THE PARTIES HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH
COURTS AND AGREE TO SAID VENUE.
(c) THE PARTIES HEREBY IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
58
<PAGE>
21. MISCELLANEOUS
21.1. SEVERABILITY
The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.
21.2. NO WAIVER
It is agreed that a waiver by any Party of a breach of any provision
of this Agreement shall not operate, or be construed, as a waiver of any
subsequent breach by the breaching Party.
21.3. FURTHER ASSURANCES
The Parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement,
including entering into the other Transaction Documents to which each is a
Party.
21.4. CONSTRUCTION
The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party. The word "including" as
used herein shall not be construed so as to exclude any other thing not referred
to or described.
59
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
duly signed as of the date first above written.
XM SATELLITE RADIO HOLDINGS INC. XM SATELLITE RADIO INC.
By: /s/ Joseph M. Titlebaum By: /s/ Joseph M. Titlebaum
------------------------------------ ---------------------------------
Name: Joseph M. Titlebaum Name: Joseph M. Titlebaum
Title: Senior Vice President, General Title: Senior Vice President,
Counsel and Secretary General Counsel and Secretary
[Signature pages of Investors follow]
NPA Signature Page
<PAGE>
COLUMBIA XM RADIO PARTNERS, LLC
By Columbia Capital LLC, its Managing Member
By: /s/ James B. Fleming, Jr.
------------------------------------------
Name: James B. Fleming, Jr.
Title: Vice President
COLUMBIA CAPITAL EQUITY PARTNERS II (QP), L.P.
By: Columbia Capital Equity Partners III, L.P., its General
Partner
By: /s/ James B. Fleming, Jr.
-----------------------------------------
Name: James B. Fleming, Jr.
Title: Vice President
COLUMBIA XM SATELLITE PARTNERS III, LLC
By: /s/ James B. Fleming, Jr.
------------------------------------------
Name: James B. Fleming, Jr.
Title: Vice President
COLUMBIA CAPITAL EQUITY PARTNERS III (QP), L.P.
By: Columbia Capital Equity Partners III, L.P., its General
Partner
By: /s/ James B. Fleming, Jr.
-----------------------------------------
Name: James B. Fleming, Jr.
Title: Vice President
AEA XM INVESTORS IA LLC
By XM Investors IA LP, its Sole Member
By AEA XM Investors Inc., its General Partner
By: /s/ Christine J. Smith
------------------------------------------
Name: Christine J. Smith
Title: Vice President
AEA XM INVESTORS IIA LLC
By XM Investors IIA LP, its Sole Member
By AEA XM Investors Inc., its General Partner
By: /s/ Christine J. Smith
----------------------------------------
Name: Christine J. Smith
Title: Vice President
HUGHES ELECTRONICS CORPORATION
By: /s/ Patrick T. Doyle
------------------------------------------
Name: Patrick T. Doyle
Title: Vice President, Treasurer and Controller
BLACK BEAR FUND I, L.P., a California limited
partnership
By Eastbourne Capital Management, L.L.C., its
general partner
By: /s/ Eric M. Sippel
------------------------------------------
Eric M. Sippel
Chief Operating Officer
BLACK BEAR OFFSHORE MASTER FUND LIMITED, a
Cayman Islands exempted company
By Eastbourne Capital Management, L.L.C., its
investment adviser and attorney in fact
By: /s/ Eric M. Sippel
------------------------------------------
Eric M. Sippel
Chief Operating Officer
BLACK BEAR FUND II, L.L.C., a California limited
liability company
By Eastbourne Capital Management, L.L.C., its
manager
By: /s/ Eric M. Sippel
------------------------------------------
Eric M. Sippel
Chief Operating Officer
GEORGE HAYWOOD
/s/ George Haywood
---------------------------------------------
NPA Signature Page
<PAGE>
BAYSTAR CAPITAL II, L.P., a Delaware limited
partnership
By BayStar Capital Management LLC, its
general partner
By: /s/ Lawrence Goldfarb
------------------------------------------
Name: Lawrence Goldfarb
Title: Managing Member
BAYSTAR INTERNATIONAL II L.P., a British Virgin
Islands exempt company
By BayStar Capital Management LLC, its
investment manager
By: /s/ Lawrence Goldfarb
---------------------------------------
Name: Lawrence Goldfarb
Title: Managing Member
ROYAL BANK OF CANADA
By its agent, RBC
Dominion Securities Corporation
By: /s/ Steven C. Milke
------------------------------------------
Name: Steven C. Milke
Title: Managing Director
By: /s/ Richard J. Tavoso
------------------------------------------
Name: Richard J. Tavoso
Title: Managing Director
SUPERIUS SECURITIES GROUP, INC. MONEY PURCHASE PLAN
By: /s/ James Hudgins
------------------------------------------
Name: James Hudgins
Title: Trustee
SF CAPITAL PARTNERS, LTD., a British Virgin Islands
company
By: /s/ Brian H. Davidson
------------------------------------------
Name: Brian H. Davidson
Title: Authorized Signatory
AMERICAN HONDA MOTOR CO., INC., a California corporation
By: /s/ Thomas G. Elliott
------------------------------------------
Name: Thomas G. Elliott
Title: Executive Vice President
MICHAEL W. HARRIS
/s/ Michael W. Harris
---------------------------------------------
NPA Signature Page
<PAGE>
PAUL GREENWALD
/s/ Paul Greenwald
---------------------------------------------
AVDAN PARTNERS, L.P.
By: /s/ Mark B. Friedman
---------------------------------------------
Name: Mark B. Friedman
Title: President, MBF Capital Management, Inc.
Its Managing General Partner
HEARST COMMUNICATIONS, INC., a Delaware corporation
By: /s/ Kenneth A. Bronfin
------------------------------------------
Name: Kenneth A. Bronfin
Title: President, Hearst Interactive Media,
a division of Hearst Communicaitons, Inc.
JOHN DEALY
/s/ John Dealy
---------------------------------------------
A.R. SANCHEZ, JR.
/s/ A.R. Sanchez, Jr.
---------------------------------------------
NEERA SINGH and RAJENDRA SINGH JTWROS
/s/ Neera Singh
---------------------------------------------------------
/s/ Rejendra Singh
---------------------------------------------------------
HERSH RAJ SINGH EDUCATIONAL TRUST
By:
/s/ Neera Singh
---------------------------------------------------------
Name: Neera Singh
Title: Trustee
/s/ J.T. Westermeier
---------------------------------------------------------
Name: J.T. Westermeier
Title: Co-Trustee
SAMIR RAJ SINGH EDUCATIONAL TRUST
By:
/s/ Neera Singh
------------------------------------------------------------
Name: Neera Singh
Title: Trustee
s/ J.T. Westermeier
---------------------------------------------------------
Name: J.T. Westermeier
Title: Co-Trustee
NPA Signature Page
<PAGE>
ATTACHMENT 1
<TABLE>
<CAPTION>
Investor Aggregate Initial Value of Notes Purchased
<S> <C>
AEA
AEA XM Investors IA LLC $ 838,645.50
c/o AEA Investors Inc.
65 E 55th Street
New York, New York 10022
Attention: General Counsel
Fax: 212-702-0518
AEA XM Investors IIA LLC 6,861,354.50
c/o AEA Investors Inc.
65 E 55th Street
New York, New York 10022
Attention: General Counsel
Fax: 212-702-0518
Columbia Capital
Columbia Capital Equity Partners II (QP), L.P. 3,085,866.46
c/o Columbia Capital, LLC
201 North Union Street, Suite 300
Alexandria, VA 22314
Attention: James B. Fleming
Fax: 703-519-5870
Columbia XM Radio Partners, LLC 3,354,133.54
c/o Columbia Capital, LLC
201 North Union Street, Suite 300
Alexandria, VA 22314
Attention: James B. Fleming
Fax: 703-519-5870
Columbia Capital Equity Partners III (QP), L.P. 1,107,920.45
c/o Columbia Capital, LLC
201 North Union Street, Suite 300
Alexandria, VA 22314
Attention: James B. Fleming
Fax: 703-519-5870
Columbia XM Satellite Partners III, LLC 952,079.55
c/o Columbia Capital, LLC
201 North Union Street, Suite 300
Alexandria, VA 22314
Attention: James B. Fleming
Fax: 703-519-5870
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Hughes Electronics Corporation 10,000,000
200 N. Sepulveda Boulevard
El Segundo, California 90245
Attention: Graham Jenner
Fax: 310-640-1734
Eastbourne Capital Management, L.L.C.
Black Bear Fund I, L.P. 11,358,000
c/o Eastbourne Capital Management, L.L.C.
1101 Fifth Avenue, Suite 160
San Rafael, California 94901
Attention: Eric M. Sippel, Chief Operating Officer
Fax: 415-448-1246
Black Bear Fund II, L.L.C. 1,343,000
c/o Eastbourne Capital Management, L.L.C.
1101 Fifth Avenue, Suite 160
San Rafael, California 94901
Attention: Eric M. Sippel, Chief Operating Officer
Fax: 415-448-1246
Black Bear Offshore Master Fund Limited 24,599,000
c/o Eastbourne Capital Management, L.L.C.
1101 Fifth Avenue, Suite 160
San Rafael, California 94901
Attention: Eric M. Sippel, Chief Operating Officer
Fax: 415-448-1246
George Haywood 7,000,000
c/o Cronin & Vris, LLP
380 Madison Avenue
24th Floor
New York, New York 10017
Fax: 718-832-8292
Hearst Communications, Inc. 12,500,000
c/o Hearst Interactive Media
959 Eighth Avenue
New York, New York 10019
Attn: President, Hearst Interactive Media
Fax: 212-582-7739
</TABLE>
<PAGE>
<TABLE>
<S> <C>
BayStar Group 10,830,000
BayStar Capital II, LP
c/o BayStar Capital Management, LLC
80 E. Sir Francis Drake Blvd., Suite 2B
Larkspur, California 94939
Fax: 415-834-4681
BayStar International II, Ltd. 1,170,000
c/o BayStar Capital Management, LLC
80 E. Sir Francis Drake Blvd., Suite 2B
Larkspur, California 94939
Fax: 415-834-4681
Royal Bank of Canada 27,300,000
c/o RBC Dominion Securities Corporation
165 Broadway
One Liberty Plaza
New York, NY 10006
Attention: Michael Frommer
Fax: 212-858-7439
America Honda Motor Co., Inc. 50,000,000
1919 Torrance Blvd.
Torrance, California 90501-2746
Attention: Shinichi Sakamoto
Fax: 310-783-2210
Superius Securities Group, Inc. Money Purchase Plan 3,000,000
94 Grand Ave.
Englewood, New Jersey 07631
Fax: 201-568-9392
John Dealy 500,000
c/o XM Satellite Radio Holdings Inc.
1500 Eckington Place, NE
Washington, District of Columbia 20002-2194
Fax: 202-380-4534
Avdan Partners, L.P. 700,000
100 Shoreline Highway, Suite 185-A
Mill Valley, California 94941
Fax: 415-239-3946
Michael W. Harris 500,000
c/o Harris & Panels
120 East Washington Street
Suite 511
Syracuse, New York 13202
Fax: 315-472-2481
Paul Greenwald 1,500,000
c/o Harris & Panels
120 East Washington Street
Suite 511
Syracuse, New York 13202
Fax: 315-472-2481
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SF Capital Partners, Ltd. 5,000,000
c/o Staro Asset Management, LLC
3600 South Lake Drive
St. Francis, Wisconsin 53235
Attention: Brian H. Davidson
Fax: 414-294-4416
Neera Singh and Rajendra Singh JTWROS 1,500,000
7925 Jones Branch Drive
Suite 6400
McLean, Virginia 22102
Attn: General Counsel
Fax: 703-873-4501
Hersh Raj Singh Educational Trust 750,000
7925 Jones Branch Drive
Suite 6400
McLean, Virginia 22102
Attention: General Counsel
Fax: 703-873-4501
Samir Raj Singh Educational Trust 750,000
7925 Jones Branch Drive
Suite 6400
McLean, Virginia 22102
Attention: General Counsel
Fax: 703-873-4501
A.R. Sanchez, Jr. 1,000,000
1920 Sandman
Laredo, Texas 78041
Fax: 956-722-1017
--------------
Total 185,000,000
</TABLE>
<PAGE>
EXHIBIT A
[Face of Note]
--------------------------------------------------------------------------------
10% Senior Secured Discount Convertible Notes due 2009
No. 1 $____________
XM SATELLITE RADIO HOLDINGS INC.
XM SATELLITE RADIO INC.
promises to pay to______________________________________________________________
or registered assigns,
the principal sum of____________________________________________________________
Dollars on December 31, 2009.
Interest Payment Dates: _______ and _______
Record Dates: _______ and _______
Dated:
---------
XM SATELLITE RADIO HOLDINGS INC.
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
XM SATELLITE RADIO INC.
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
--------------------------------------------------------------------------------
A-1
<PAGE>
[Back of Note]
10% Senior Secured Discount Convertible Notes due 2009
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.
[THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE THE SUBJECT OF A CERTAIN
NOTEHOLDERS AND SHAREHOLDERS AGREEMENT WHICH, AMONG OTHER THINGS, CONTAINS
RESTRICTIONS ON THE TRANSFER OF SUCH SECURITIES. A COPY OF THE NOTEHOLDERS AND
SHAREHOLDERS AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF XM
SATELLITE RADIO INC. AND XM SATELLITE RADIO HOLDINGS INC.]
Capitalized terms used herein shall have the meanings assigned to them in
the Note Purchase Agreement, dated as of December 21, 2002, by and among XM
Satellite Radio Inc., XM Satellite Radio Holdings Inc. and the investors set
forth therein (the "Note Purchase Agreement").
1. Interest. XM Satellite Radio Inc., a Delaware corporation (the
"Company"), and XM Satellite Radio Holdings Inc, a Delaware corporation (the
"Holdings" and, together with the Company, the "Obligors"), promise to pay
interest on the principal amount of this Note at 10% per annum from January 1,
2006 until maturity, together with any additional interest accruing from time to
time pursuant to Section 2.2 of the Registration Rights Agreement ("Additional
Interest"). The Obligors will pay interest semi-annually in arrears on June 30
and December 31 of each year, commencing June 30, 2006 (or, with respect to
Additional Interest accruing on an earlier June 30 and December 31 if Additional
Interest shall accrue prior to January 1, 2006, as provided in the Note Purchase
Agreement), or if any such day is not a Business Day, on the next succeeding
Business Day (each an "Interest Payment Date"). Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from January 1, 2006, except that Additional Interest
will accrue in accordance with Section 2.2 of the Registration Rights Agreement.
The Obligors shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate of 12% per annum (plus the rate of any
applicable Additional Interest accruing from time to time); they shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest from time to time on demand
at the same rate to the extent lawful. Interest will be computed on the basis of
a 360-day year of twelve 30-day months. This Note has an Accreted Value as
determined from time to time in accordance with the Note Purchase Agreement.
2. Method of Payment. The Obligors will pay interest on the Notes to the
Persons who are registered Holders of Notes at the close of business on the June
15 or December 15 next preceding an Interest Payment Date, even if such Notes
are canceled after such record date and on or before such Interest Payment Date.
Each payment of interest on the Notes will be made to the Holder by certified or
bank cashier's check or wire transfer of immediately available funds or by the
issuance of additional Notes, 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. Any such written instructions may provide that the
information contained therein shall continue to be in effect with respect to
subsequent interest payments until thereafter modified by written instructions
of such Holder, which modified instructions shall take effect as of the next
Interest Payment Date occurring more than five Business Days after delivery of
such modified instructions. Any Note issued to a Holder as payment of interest
due on an Interest Payment Date will be issued in a principal amount equal to
the amount of such interest, will commence accruing interest as of the calendar
day immediately following such Interest Payment Date, will otherwise have the
same terms as the Notes issued at Closing and will be subject to the provisions
and have the benefits of the Note Purchase Agreement. Notwithstanding the
foregoing, no Additional Interest shall be payable at any time by the issuance
of additional Notes and no other interest shall be payable by issuance of
additional Notes if Additional Interest shall be accruing on the Notes as of the
applicable Interest Payment Date.
A-2
<PAGE>
3. Security Agreements. The Notes are secured obligations of the
Obligors. The Notes are secured by a pledge of the Collateral pursuant to the
Security Agreements.
4. Conversion. Each Holder shall have the right, at its option, at any
time, subject to the terms and provisions of this Agreement, as applicable, to
Convert the Accreted Value of each of its Notes or any portion thereof held by
such Holder (together with interest accrued and any premium on such Note or
portion thereof to be Converted) into shares of Conversion Stock at the
Conversion Price, promptly after surrender of such Note, accompanied by written
notice of Conversion specifying the principal amount thereof to be Converted
duly executed, to Holdings at any time during usual business hours at the office
of Holdings at, and, if so required by Holdings, accompanied by a written
instrument or instruments of transfer in form satisfactory to Holdings, duly
executed by such Holder or its attorney duly authorized in writing.
Notwithstanding any other provision hereof, if a Conversion of a Note is to be
made in connection with a sale of Holdings or other event, such Conversion may,
at the election of any Holder tendering such Note for Conversion, be expressly
conditioned upon the consummation of such other event, in which case such
conversion shall not be deemed to be effective until the consummation or
occurrence of such other event. Conversions of this Note may be limited pursuant
to Sections 9.1, 9.7 or 9.10 of the Note Purchase Agreement.
5. Conversion at the Option of Holdings.
The Obligors may, at any time on or after the fourth anniversary of
the Closing Date, require the Holders to Convert the Accreted Value of all, but
not less than all, of the Notes (together with any premium and accrued interest
thereon) into shares of Conversion Stock at the Conversion Price if each of the
following conditions is met:
(a) shares of the Class A Common Stock shall have traded on the
Nasdaq National Market or a national securities exchange during each of the 30
Trading Days immediately preceding the Determination Date (as defined below);
(b) on each of the 30 Trading Days immediately prior to the
Determination Date, shares of Class A Common Stock shall have traded at a price
in excess of 200% of the Conversion Price then in effect;
(c) Holdings shall have reported earnings before interest income
and expense, other income, taxes, depreciation (including amounts related to
research and development) and amortization greater than $0 for the immediately
preceding quarterly period for which Holdings reports its financial results, as
set forth in consolidated financial statements contained in Holdings' SEC
reports for such quarterly period, which financial statements shall have been
reviewed (or audited in the case of an annual report) by the certified
independent accountants of Holdings;
(d) immediately following such Conversion, the aggregate amount
of Indebtedness of Holdings and its Subsidiaries on a consolidated basis shall
be less than $250,000,000; and
(e) no shares of Series C Preferred Stock shall remain
outstanding.
The Obligors may require such a Conversion by delivering irrevocable written
notice of such election to the Holders (the date on which such notice is sent
being referred to herein as the "Determination Date"), and the fifth Trading Day
after the date any such notice is delivered to the Holders (as determined in
accordance with the notice provisions hereof) will be the "Conversion Date" for
such required conversion. Promptly upon receipt of such written notice, each
Holder shall surrender its Note or Notes to Holdings at a time during usual
business hours at the office of Holdings at, and, if so required by Holdings,
accompanied by a written instrument or instruments of transfer in form
satisfactory to Holdings, duly executed by such Holder or its attorney duly
authorized in writing.
6. Denominations, Transfer. The Notes are in registered form without
coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered as provided in the Note Purchase Agreement.
The Obligors may require a Holder, among other things, to furnish appropriate
endorsements and
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transfer documents and the Obligors may require a Holder to pay any taxes and
fees required by law in connection with a transfer or conversion.
7. Persons Deemed Owners. The registered Holder of a Note may be treated
as its owner for all purposes.
8. Amendment, Supplement and Waiver. Except as expressly provided
elsewhere herein or in the Note Purchase Agreement, any term of the Note
Purchase Agreement or of this Note may be amended, and the observance of any
term of the Agreement or of this Note may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of (i) each Obligor and (ii) the Majority Holders. Any provision
of this Note or the Note Purchase Agreement that expressly provides for waiver
or consent by a specified group or percentage of the Investors or Holders may be
amended or waived only by such specified group or percentage of the Investors or
Holders. Any amendment or waiver effected in accordance with this Section 8
shall be binding upon each Holder of the Notes, each future Holder of the Notes
and each Obligor. Any consent or waiver obtained under Section 7.3 of the
Noteholders Agreement or Section 4.2 of the Director Agreement that approves an
action not permitted hereunder shall be considered a waiver of the applicable
provision of this Agreement with respect to the matter as to which the consent
or waiver was obtained. Notwithstanding the foregoing, the Notes (including this
Note) or the Note Purchase Agreement may be amended or supplemented, without the
consent of any Holder of this Note, to cure any ambiguity, defect or
inconsistency in a manner that does not materially adversely affect any Holder
of the Notes, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights of any such Holder. Further, notwithstanding any of the foregoing,
without the consent of each Holder affected, an amendment or waiver under this
Section 8 or Section 16 of the Note Purchase Agreement may not, with respect to
any Note held by a non-consenting Holder:
(a) reduce the principal amount at maturity of Notes whose Holders
must consent to an amendment, supplement or waiver;
(b) reduce the Accreted Value or principal amount of, or change the
fixed maturity of, such Note or alter or waive any of the provisions with
respect to the repurchase of such Note pursuant to Sections 7.8 and 7.12 of the
Note Purchase Agreement;
(c) reduce the Interest Rate applicable to such Note, reduce the rate
at which the Accreted Value of such Note increases, or change the time for
payment of interest, including default interest, on such Note;
(d) waive a Default or Event of Default in the payment of interest or
premium, if any, on such Note (except a rescission of acceleration of the Notes
by the Majority Holders and a waiver of the payment default that resulted from
such acceleration);
(e) make the principal or Accreted Value of, or interest or premium
on, such Note payable in money or assets other than that stated in such Note or
the Note Purchase Agreement;
(f) except as expressly provided in such Note or the Note Purchase
Agreement, increase the Conversion Price applicable to such Note, limit the
times at which or amounts for which such Note may be Converted into Conversion
Stock, change the terms under which the Obligor can require Conversion of such
Note, or change the nature of the consideration to be received upon a Conversion
of such Note;
(g) make any change in the provisions of the Note Purchase Agreement
relating to waivers of past Defaults or the rights of the Holder of such Note to
receive payments of principal of or interest or premium, if any, on such Note;
(h) release any portion of the Collateral from the Lien of the
Security Agreements, except in accordance with the terms thereof, including the
provisions of Section 19 of the FCC License Subsidiary Pledge Agreement and
Section 8 of the General Security Agreement; or
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(i) make any change in Section 8.6 of the Note Purchase Agreement.
9. Defaults and Remedies. Events of Default include: (i) default for 30
days in the payment when due of interest on the Notes; (ii) default in payment
when due of principal of or premium, if any, on the Notes (including in
connection with an offer to purchase) or otherwise, (iii) failure by the
Obligors to comply with the provisions of Section 7.16 of the Note Purchase
Agreement, the failure of the Obligors to make or consummate a Change of Control
Offer in accordance with the provisions of Section 7.12 of the Note Purchase
Agreement, or the failure of the Obligors to make or consummate an Asset Sale
Offer in accordance with the provisions of Section 7.8 of the Note Purchase
Agreement; (iv) failure by an Obligor or any of its Subsidiaries, for 60 days
after notice to such Obligor by the Holders of at least 25% in principal amount
at maturity of the Notes then outstanding, to comply with certain covenants and
other agreements in the Agreement, the Notes or either of the Security
Agreements; (v) default under certain other agreements relating to Indebtedness
of an Obligor or any of its Material Subsidiaries, which default results in the
acceleration of such Indebtedness prior to its express maturity; (vi) certain
final judgments for the payment of money that remain undischarged for a period
of 60 days and with respect to certain actions against an Obligor under Section
5 of the Securities Act; (vii) certain events of bankruptcy or insolvency with
respect to an Obligor or any of its Significant Subsidiaries and (viii) the
breach or repudiation of certain covenants in either of the Security Agreements
or any Agreement Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect. If any Event of Default occurs and is continuing, the Holders of at
least 25% in principal amount at maturity of the then outstanding Notes may
declare the Accreted Value of the Notes, together with any premium and accrued
interest thereon, to be due and payable. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, the Accreted Value of all outstanding Notes will become due and
payable without further action or notice. The Majority Holders may on behalf of
the Holders of all of the Notes waive any existing Default or Event of Default
and its consequences under the Note Purchase Agreement except a continuing
Default or Event of Default in the payment of interest on, or the principal of,
the Notes.
10. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of an Obligor or any Subsidiary Guarantor, as such,
shall not have any liability for any obligations of such Obligor or such
Subsidiary Guarantor under the Notes, the Note Purchase Agreement, the Agreement
Guarantees, the Security Agreements or the Intercreditor Agreements or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
11. Subsidiary Guarantors. Payment of principal, premium, if any, and
interest (including interest on overdue principal amount, premium, if any, and
interest, if lawful) is unconditionally guaranteed by each Subsidiary Guarantor
pursuant to Section 11 of the Note Purchase Agreement.
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<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant to
Section 7.8 or 7.12 of the Note Purchase Agreement, check the appropriate box
below:
[ ] Section 7.8 [ ] Section 7.12
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 7.8 or Section 7.12 of the Note Purchase Agreement, state
the amount you elect to have purchased:
$______________
Date:
--------------
Your Signature:
----------------------------
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:
--------------------
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<PAGE>
Exhibit B
[Filed separately as Exhibit 4.2 hereto]
Exhibit C
[Filed separately as Exhibit 4.3 hereto]
Exhibit D
[Filed separately as Exhibit 10.4 hereto]
Exhibit E
[Filed separately as Exhibit 10.5 hereto]
<PAGE>
EXHIBIT F
FORM OF AGREEMENT GUARANTEE
This Agreement Guarantee is delivered by the undersigned (the
"Subsidiary Guarantor") with respect to the 10% Senior Secured Discount
Convertible Notes issued by XM Satellite Radio Inc. and XM Satellite Radio
Holdings Inc. from time to time pursuant to the Note Purchase Agreement dated as
of December 19, 2002 among XM Satellite Radio Inc., XM Satellite Radio Holdings
Inc. and the several investors named therein (the "Note Purchase Agreement").
Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Note Purchase Agreement.
For value received, the Subsidiary Guarantor hereby fully and
unconditionally guarantees to each Holder of a Note that: (a) the Accreted Value
of, and premium and interest on, the Notes will be duly and punctually paid in
full when due, whether at maturity, by acceleration or otherwise, and interest
on overdue principal and premium amount and (to the extent permitted by law)
interest on any interest, if any, on the Notes and all other obligations of the
Obligors to the Holders under the Note Purchase Agreement, the Notes or the
Security Agreements (including fees, expenses or other) will be promptly paid in
full or performed, all in accordance with the terms hereof and thereof; and (b)
in case of any extension of time of payment or renewal of any Notes or any of
such other obligations the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
Stated Maturity, by acceleration or otherwise.
The Subsidiary Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of such parties that the guarantee by
such Subsidiary Guarantor pursuant to this Agreement Guarantee not constitute a
fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law. To effectuate the foregoing intention, the Holders
and the Subsidiary Guarantor hereby irrevocably agree that the obligations of
the Subsidiary Guarantor under this Agreement Guarantee shall be limited to the
minimum extent necessary to ensure that, after giving effect to all other
contingent and fixed liabilities of the Subsidiary Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the obligations of such other Subsidiary
Guarantor under this Agreement Guarantee, the obligations of the Subsidiary
Guarantor under this Agreement Guarantee do not constitute a fraudulent transfer
or conveyance under applicable law.
Failing payment when due of any amount so guaranteed or failing
performance of any other obligation of the Obligors to the Holders, for whatever
reason, the Subsidiary Guarantor will be obligated to pay or to perform or to
cause the performance of, the same immediately without the necessity of any
action by the Holders of Notes. An Event of Default under the Note Purchase
Agreement or the Notes shall constitute an event of default under this Agreement
Guarantee, and shall entitle the Holders of Notes to accelerate the obligations
of the Subsidiary Guarantor hereunder in the same manner and to the same extent
as the obligations of the Obligors.
The Subsidiary Guarantor hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or the Note Purchase Agreement, the absence of any
action to enforce the same, any waiver or consent by any Holder of the Notes
with respect to any thereof, the entry of any judgment against an Obligor, any
action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of the Subsidiary
Guarantor.
The Subsidiary Guarantor hereby waives and relinquishes: (a) any
right to require the Holders (each, a "Benefited Party") to proceed against the
Obligors, any Subsidiary thereof or any other Person or to proceed against or
exhaust any security held by or on behalf of a Benefited Party at any time or to
pursue any other remedy in any secured party's power before proceeding against
the Subsidiary Guarantor; (b) any defense that may arise by reason of the
incapacity, lack of authority, death or disability of any other Person or
Persons or the failure of a Benefited Party to file or enforce a claim against
the estate (in administration, bankruptcy or any other proceeding) of any other
Person or Persons; (c) demand, protest and notice of any kind, including but not
limited to notice of the existence, creation or incurring of any new or
additional Indebtedness or obligation or of any action or non-action on
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<PAGE>
the part of the Subsidiary Guarantor, the Obligors, the Material Subsidiaries,
any Benefited Party, or any creditor of the Subsidiary Guarantor, the Obligors
or the Material Subsidiaries or on the part of any other Person whomsoever in
connection with any obligations the performance of which are hereby guaranteed;
(d) any defense based upon an election of remedies by a Benefited Party,
including but not limited to an election to proceed against the Subsidiary
Guarantor for reimbursement; (e) any defense based upon any statute or rule of
law which provides that the obligation of a surety must be neither larger in
amount nor in other respects more burdensome than that of the principal; (f) any
defense arising because of a Benefited Party's election, in any proceeding
instituted under the Bankruptcy Law, of the application of Section 1111 (b)(2)
of the Bankruptcy Code; and (g) any defense based on any borrowing or grant of a
security interest under Section 364 of the Bankruptcy Code.
The Subsidiary Guarantor hereby covenants that this Agreement
Guarantee will not be discharged except by payment in full of all principal,
premium, if any, and interest on the Notes and all other costs provided for
under the Note Purchase Agreement, or as provided in Section 11.3 of the Note
Purchase Agreement.
If any Holder is required by any court or otherwise to return to
either the Obligors or the Subsidiary Guarantor, or any custodian, trustee, or
similar official acting in relation to the Obligors or the Subsidiary Guarantor,
any amount paid by the Obligors or the Subsidiary Guarantor to such Holder, this
Agreement Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect. The Subsidiary Guarantor agrees that it will not be
entitled to any right of subrogation in relation to the Holders in respect of
any obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.
The Subsidiary Guarantor agrees that, as between it, on the one
hand, and the Holders of Notes, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Section 8 of the
Note Purchase Agreement for the purposes hereof, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any acceleration of such
obligations as provided in Section 8 of the Note Purchase Agreement, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Subsidiary Guarantor for the purpose of this Agreement Guarantee.
The Subsidiary Guarantor hereby acknowledges that it shall not
consolidate or merge with or into a corporation or any other entity other than
an Obligor or another Subsidiary Guarantor (whether or not affiliated with the
Subsidiary Guarantor), or transfer all or substantially all of its assets to a
corporation or any other entity other than an Obligor or another Subsidiary
Guarantor (whether or not affiliated with the Subsidiary Guarantor), unless this
Agreement Guarantee shall be expressly assumed (in the event that the Subsidiary
Guarantor is not the surviving corporation in the merger) or a new Agreement
Guarantee shall be signed by such successor corporation or other entity and
delivered to each Holder of Notes. Any Agreement Guarantee so issued shall in
all respects have the same legal rank and benefit under the Note Purchase
Agreement as any Agreement Guarantee theretofore and thereafter issued in
accordance with the terms of the Note Purchase Agreement as though all of such
Agreement Guarantees had been issued at the date of the execution thereof.
This Agreement Guarantee shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned Subsidiary Guarantor has caused
this Agreement Guarantee to be duly executed as of __________, 200_.
[Name of Subsidiary Guarantor]
By:
-----------------------------------
Name:
Title:
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<PAGE>
Exhibit G
[Filed separately as Exhibit 10.12 hereto]
Exhibit H
[Filed separately as Exhibit 10.6 hereto]
<PAGE>
SCHEDULE 4.7
Absence of Proceedings
See Schedule 4.8.
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SCHEDULE 4.8
Possession of Licenses and Permits
Attached hereto is the current disclosure of XM Satellite Radio Holdings Inc.
with respect to FCC matters:
XM Radio and Sirius Radio received licenses from the FCC in October 1997 to
construct and operate satellite radio service systems. The FCC has allocated 25
MHz for the new service in a range of radio frequencies known as the S-Band.
As the owner of one of two FCC licenses to operate a commercial satellite
radio service in the United States, we will continue to be subject to regulatory
oversight by the FCC. Our development, implementation and operation of our
system is subject to significant regulation by the FCC under authority granted
under the Communications Act and related federal law. Non-compliance by us with
FCC rules and regulations could result in fines, additional license conditions,
license revocation or other detrimental FCC actions. Any of these FCC actions
may harm our business. There is no guarantee that the rules and regulations of
the FCC will continue to support our business plan.
One of the two losing bidders in the satellite radio license auction filed
a petition to deny our application for an FCC license, but the petition was
denied. The losing bidder asked the FCC to review this decision. The losing
bidder also asked a federal court of appeals to mandate that the FCC review this
decision. On November 30, 2001, the FCC denied the losing bidder's application
for review and upheld the FCC's previous decision denying its petition to deny.
The losing bidder has appealed the decision to the United States Court of
Appeals for the District of Columbia Circuit. The losing bidder has argued that
WorldSpace had effectively taken control of us without FCC approval and that
WorldSpace has circumvented the FCC's application cut-off procedures. WorldSpace
is no longer a stockholder in us. We, along with the FCC, have opposed this
appeal and we have denied the allegations contained in the challenge. The FCC's
order granting our license remains in effect during the pendency of the appeal.
In December 2000, the FCC approved a transfer of control of our FCC license from
Motient Corporation to a diffuse group of owners, none of whom will have a
controlling interest in us. The FCC has conditioned this approval on the outcome
of the application for review. Although we believe that the award of the license
to us will continue to be upheld, we cannot predict the ultimate outcome of this
challenge. If this challenge is successful, the FCC could take a range of
actions, any of which could harm our ability to proceed with our satellite radio
service.
Our license, which is held by a subsidiary wholly owned by XM, has a term
of eight years from commencement of XM's operations and may be renewed. The FCC
requires the satellite radio licensees, including us, to adhere to certain
milestones in the development of their systems, including a requirement that the
licensees begin full operation by October 2003. We have certified to the FCC
that we have met all of the milestones applicable to our license.
The FCC has indicated that it may in the future impose public service
obligations, such as channel set-asides for educational programming, on
satellite radio licensees.
The FCC's rules require interoperability with all licensed satellite radio
systems that are operational or under construction. The FCC conditioned our
license on certification by us that our final receiver design is interoperable
with the final receiver design of the other licensee, Sirius Radio, which plans
to use a different transmission technology than we plan to use. Depending on
what level of interoperability is required, we may not initially meet this
interoperability requirement. We have signed an agreement with Sirius Radio to
develop a unified standard for satellite radios, but we anticipate that it will
take several years to develop the technologies necessary for radios that will be
capable of receiving both our service and Sirius Radio's service. Furthermore,
complying with the interoperability requirement could make the radios more
difficult and costly to manufacture. Together with Sirius Radio, we have
informed the FCC of the progress that has been made to date in meeting the
interoperability requirement.
The FCC is currently conducting a rulemaking proceeding to establish rules
for terrestrial repeater transmitters, which we have deployed and plan to
continue deploying to fill in gaps in satellite coverage. The FCC has proposed
to permit us to deploy these facilities. Specifically, the FCC has proposed a
form of blanket licensing for terrestrial repeaters and service rules which
would prohibit satellite radio licensees from using terrestrial repeating
transmitters
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to originate local programming or transmit signals other than those received
from the satellite radio satellites. Various parties, including the National
Association of Broadcasters, Wireless Communications Service (WCS) licensees,
Multipoint Distribution Service (MDS) licensees, and Instructional Television
Fixed Service (ITFS) licensees have asked the FCC to:
. limit the number of repeaters operating at greater than 2 kW EIRP that may
be deployed;
. limit the power level of the repeaters operating at greater than 2 kW EIRP
that are deployed;
. delay consideration of terrestrial repeater rules until XM Radio and Sirius
Radio provide additional information regarding planned terrestrial
repeaters;
. require individual licensing of each terrestrial repeater; and
. impose a waiting period on the use of repeaters in order to determine if
signal reception problems can be resolved through other means.
Our deployment of terrestrial repeaters may be impacted, possibly
materially, by whatever rules the FCC issues in this regard. We have made a
proposal to the FCC to set a 40 kW EIRP limit or, alternatively, a limit of 18
kW EIRP calculated by averaging power over 360 degrees, on the power of
terrestrial repeaters. We have also proposed to coordinate with WCS licensees in
certain cases prior to operating terrestrial repeaters above 2 kW EIRP. The
coordination may include our providing of filters in certain instances to limit
the interference WCS licensees claim will result from our operation of repeaters
operating above 2 kW EIRP.
On November 1, 2001, the FCC issued a further request for comments on
various proposals for permanent rules for the operation of terrestrial
repeaters. We have opposed some of these proposals. Some of the FCC's proposals
and proposals made by other parties, if adopted by the FCC, could impact our
ability to operate terrestrial repeaters, including requiring us to reduce the
power of some of our current repeaters, and subject us to monetary liability to
compensate other FCC licensees that claim they receive interference from our
repeaters.
We are currently operating terrestrial repeaters pursuant to Special
Temporary Authority ("STA") granted by the FCC in September 2001. This STA
authorizes us to operate our terrestrial repeaters for commercial service on a
non-interference basis. Because the STA was conditioned on a non-interference
basis, we are required to either reduce power or cease operating a repeater upon
receipt of a written complaint of interference. One party that opposed XM
Radio's request for STA has filed an application for review of the decision
granting us an STA asking the FCC to reverse the decision and deny XM Radio's
STA request. This Application for Review is pending. This STA expired on March
18, 2002. On March 11, 2002, we applied for an extension of this STA. Pursuant
to the FCC's rules, we can continue to operate our terrestrial repeaters
pursuant to the STA pending a final determination on our extension request.
The FCC also may adopt limits on emissions of terrestrial repeaters to
protect other services using nearby frequencies. While we believe that we will
meet any reasonable non-interference standard for terrestrial repeaters, the FCC
has no specific standard at this time, and the application of such limits might
increase our cost of using repeaters. Although we are optimistic that we will be
able to construct and use terrestrial repeaters as needed, the development and
implementation of the FCC's ultimate rules might delay this process or restrict
our ability to do so. We believe that it is not likely that an FCC order would
materially impact the terrestrial repeater system design currently in operation.
We are required to coordinate the XM Radio system with systems operating in
the same frequency bands in adjacent countries. Canada and Mexico are the
countries whose radio systems are most likely to be affected by satellite radio.
The United States government, which conducts the coordination process, has
resolved the issue with both the Canadian and Mexican governments.
We operate the communication uplinks between our own earth station and our
satellites in a band of radio frequencies that are used for several other
services. The FCC has granted us a license for this earth station which
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expires in March 2011. The other services operating in this band are known under
FCC rules as fixed services, broadcast auxiliary services, electronic news
gathering services, and mobile satellite services for uplink station networks.
Although we are optimistic that we will succeed in coordinating any additional
domestic uplink earth stations, we may not be able to coordinate any such
further use of this spectrum in a timely manner, or at all.
We also need to protect our system from out-of-band emissions from
licensees operating in adjacent frequency bands. WCS licensees operating in
frequency bands adjacent to the satellite radio's S-Band allocation must comply
with certain out-of-band emissions limits imposed by the FCC to protect
satellite radio systems. These limits, however, are less stringent than those we
proposed. In July 2002, the FCC requested comment on a report issued by the
National Telecommunications and Information Administration ("NTIA") in which the
NTIA proposed to relocate current Department of Defense ("DOD") operations from
the 1710-1755 MHz band to the 2360-2395 MHz band. In the event that these DOD
operations are relocated to the 2360-2395 MHz band, we and Sirius Radio have
jointly proposed that the FCC apply the same out-of-band emissions limits to
these relocated users that are applied to WCS licensees. In February 2002, the
FCC initiated a rulemaking proceeding regarding rules for future licensees in
the 2385-2390 MHz band, which will be able to provide both fixed and mobile
services. We have proposed that the FCC apply the same out-of-band emissions
limits on these licensees that are applied to WCS licensees. In May 2002, the
FCC issued a decision rejecting this proposal. In July 2002, we filed a Petition
for Reconsideration of this decision which is pending. In addition, in April
1998, the FCC proposed to establish rules for radio frequency ("RF") lighting
devices that operate in an adjacent radio frequency band. We opposed the
proposal on the grounds that the proliferation of this new kind of lighting and
its proposed emissions limits, particularly if used for street lighting, may
interfere with XM Radio. Jointly with Sirius Radio, we have proposed to the FCC
an emissions limit for these RF lighting devices that we believe will protect
DARS receivers from interference. In addition, we have proposed that the FCC
require existing RF lighting devices that exceed our proposed limit to cease
operations. A manufacturer of RF lights has conducted tests which it claims
demonstrate that RF lights do not cause interference to our receivers. While our
proposal is pending, these RF lighting devices may continue to be produced and
used, which could adversely affect our signal quality. The FCC may not adopt our
proposal, a decision which could adversely affect our signal quality. In
addition, in May 2000, the FCC proposed to amend its rules to allow for the
operation of devices incorporating ultra-wideband (UWB) technology on an
unlicensed basis. We opposed this proposal on the basis that the operation of
these devices may interfere with XM Radio. In February 2002, the FCC decided to
allow for the operation of these devices and, in doing so, adopted out-of-band
emissions limits for these devices that are less stringent than XM Radio
proposed. In addition, the FCC has stated that it intends to review and
potentially relax these emissions limits and may allow for the operation of
additional types of UWB devices in the future. Jointly with Sirius Radio, we
have filed a Petition for Reconsideration of this decision and have asked that
the FCC impose stricter emissions limits on UWB devices. Interference from other
devices that operate on an unlicensed basis may also adversely affect our
signal. In May 2001, the FCC issued a notice of proposed rulemaking seeking to
facilitate the development of new unlicensed spread spectrum wireless devices
operating in a frequency band adjacent to XM Radio. XM Radio opposed this
proposal on the basis that the operation of these devices pursuant to the FCC's
current emissions limits may interfere with XM Radio's operations. In May 2002,
the FCC issued a decision rejecting our opposition. In October 2001, the FCC
initiated a rulemaking proceeding reviewing its rules for unlicensed devices. XM
Radio has proposed in this proceeding that the FCC adopt out-of-band emissions
limits for certain unlicensed devices sufficient to protect our system. XM Radio
has proposed that the FCC apply these emissions limits to products sold 18
months after a final rule is published. Some manufacturers of unlicensed devices
have opposed these limits on the grounds that they are too stringent and that it
will be costly for them to meet these limits. Our proposal is pending.
The FCC order granting our license determined that because we are a private
satellite system providing a subscription service on a non-common carrier basis,
we would not be subject to the FCC's foreign ownership restrictions. However,
such restrictions would apply to us if we were to offer non subscription
services, which may appear more lucrative to potential advertisers than
subscription services. The FCC also stated in its order that it may reconsider
its decision not to subject satellite radio licensees to its foreign ownership
restrictions.
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SCHEDULE 4.12
Indebtedness
None.
S-5
<PAGE>
SCHEDULE 4.13
Title to Properties; Liens
None.
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<PAGE>
SCHEDULE 4.14
Patents, Trademarks, Authorizations, Etc.
No exceptions.
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<PAGE>
SCHEDULE 4.15
Governmental Consents
None.
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<PAGE>
SCHEDULE 4.17
Capitalization
<TABLE>
<CAPTION>
As of
September 30, 2002
------------------
(in thousands, except share data)
<S> <C>
Cash and cash equivalents .............................................................. $ 84,318
Restricted investments (1) ............................................................. 29,370
Total cash, cash equivalents and restricted investments .......................... 113,688
Total debt ....................................................................... 415,206
Stockholders' equity:
Series A convertible preferred stock, par value $0.01 (liquidation preference
of $102,739 actual and as adjusted); 15,000,000 shares authorized,
10,786,504 shares issued and outstanding ............................................ 108
Series B convertible redeemable preferred stock, par
value $0.01 (liquidation preference of $43,364 actual
and as adjusted); 3,000,000 shares authorized, 867,289
shares issued and outstanding actual and as adjusted ................................ 9
Series C convertible redeemable preferred stock, par
value $0.01 (liquidation preference of $235,383 actual
and as adjusted); 250,000 shares authorized, 200,000
shares issued and outstanding(2) .................................................... 2
Series D junior preferred stock, par value $.01
(liquidation preference of $0 at September 30, 2002 (unaudited) and
December 31, 2002); 250,000 shares and no shares issued and outstanding at
September 30, 2002 (unaudited) and December 31, 2001 ................................ --
Class A common stock, par value $0.01; 225,000,000 shares
authorized, 91,358,068 shares issued and outstanding ................................ 489
Class C non-voting common stock, par value $0.01;
15,000,000 shares authorized, no shares issued and
outstanding ......................................................................... --
Additional paid-in capital ............................................................. 1,475,867
Accumulated deficit during development stage ........................................... (730,075)
Total stockholders' equity ....................................................... 746,825
Total capitalization ............................................................. $1,162,031
</TABLE>
10,786,504 shares of Class A common stock issuable upon exercise of Series A
convertible redeemable preferred stock, convertible at the option of the holder
on a one-for-one basis.
1,084,111 shares of Class A common stock issuable upon conversion of Series B
convertible redeemable preferred stock, convertible at the option of the holder
at a rate of 1.25 shares of Class A common stock for each share.
11,997,110 shares of Class A common stock issuable upon conversion of Series C
convertible redeemable preferred stock at a conversion price of $19.62.
6,466,830 shares of Class A common stock issuable upon conversion of 7.75%
convertible subordinated notes due 2006, convertible at the option of the holder
at a conversion price of $12.225 per share.
7,749,686 shares of Class A common stock issuable upon exercise of outstanding
options exercisable at exercise prices ranging from $3.19 per share to $45.4375
per share.
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<PAGE>
2,852,800 shares of Class A common stock issuable upon exercise of warrants at
an exercise price of $44.84.
Up to 2% of total number of shares of Class A common stock outstanding on a
fully diluted basis upon achievement of certain performance targets at an
exercise price of 105% of then current market price.
90,000 shares of Class A common stock issuable upon exercise of warrants
outstanding at an exercise price of $26.50.
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<PAGE>
SCHEDULE 4.18
Seniority of Notes
1. Indebtedness incurred pursuant to the Customer Credit Agreement, dated as of
December 5, 2001, between XM Satellite Radio Holdings Inc. and Boeing Capital
Corporation (assignee of Boeing Capital Services Corporation).
2. Indebtedness incurred pursuant to the Limited Recourse Obligations Guaranty,
dated as of August 24, 2001, by XM Satellite Radio Holdings Inc. in favor of
Fremont Investment & Loan relating to the Loan and Security Agreement, dated as
of August 24, 2001, by and between Fremont Investment & Loan and XM 1500
Eckington LLC.
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<PAGE>
SCHEDULE 4.21
No Undisclosed Fees
Certain fees have been paid to Bear Stearns & Co. Inc. pursuant to an
engagement letter with the Company.
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<PAGE>
SCHEDULE 4.22
Transactions with Affiliates
None.
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<PAGE>
SCHEDULE 4.23
Registration Rights
Amended and Restated Registration Rights Agreement, dated as of August 8,
2000, by and among XM Satellite Radio Holdings Inc. and the investors named
therein.
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